This week we have Intero President & CEO Gino Blefari examining President Obama’s idea of helping homeowners save money through expanding programs to assist them with refinancing their mortgages:

We haven’t heard much from President Obama this summer on the housing market – other than ideas for fixing the Fannie Mae/Freddie Mac problem. He’s certainly had a lot of other things to deal with. But he ended the silence in his speech on jobs last week when he said that he’s looking to broaden U.S. homeowners’ access to mortgage refinancing as a way to get more money back in their pockets.

This wasn’t terribly exciting to hear since we’ve already seen some pretty big failed attempts at “refinancing” away the housing problem. In fact, the real housing news in the President’s speech was the $447 billion jobs package itself. We all know that jobs are the real answer to cleaning up the national housing recession.

Still, Obama believes that by broadening refinancing, the average family can save more than $2,000 a year – a much-needed boost for many. In fact, with average rates on long-term fixed-rate mortgages at ridiculously low levels – 4.12% on a 30-year fixed last week – refinancing does seem like a great option for the economy. So, what is the problem? Why aren’t millions of people already refinancing their loans? Why does the government even need to create a special refinancing program?

The problem has been that even with rates as low as they are, many homeowners have been shut out of refinancing because they either have shoddy credit histories or owe more on their original mortgage than their home is worth. What the government is trying to do now is remove these and other barriers. White House officials said in news reports on the topic that the U.S. Treasury was in talks with Fannie Mae, Freddie Mac and the Federal Housing Finance Agency about ways to open up refinancing.

The problem with simply removing these barriers to refinancing is that it could cause investors in the mortgage market to lose billions of dollars. Some also say it could put Fannie and Freddie at greater financial risk. It will come down to weighing cost versus benefit: Will that extra $2,000 per year for the average homeowner be enough to save him? And is that worth turning off many more investors who will lose much more than that?

The administration hasn’t released any specifics of how a new refinancing program would work or how it would affect the mortgage industry. But they expect to begin releasing details over the next several weeks.

Refinancing is a great idea and a great privilege to those homeowners for whom it makes sense. But, at some point in this plan, I hope we see more scrutiny of the overall benefit of a government-supported program to help the overall housing economy. We have real problems in the national housing market that affect real people; I’d hate to see it continue to be just another political platform to stand on.

Advertisements