Broader access to refinancing would help housing market

I’ve spent A LOT of time in recent years studying and writing about housing issues at the local and national level.

And I’ve been frustrated by the unwillingness to take bold steps that would clearly help buoy the sector. The homebuyer tax credits were the highest profile move to date — and those were an expensive waste that did not fundamentally help the market. They just dragged out the bottoming process.

In the wake of last night’s speech, the Obama administration is finally getting serious about opening up the possibility of refinancing at today’s low rates for pretty much anyone who is up to date on their mortgage payments (details remain to be seen), even if they are underwater on the mortgage and even if their mortgage is not currently backed by a government entity.

That could result in several million (I have not seen clear projections) of the approximately 65 million homeowners (that’s a ballpark number at the moment) with mortgages paying substantially less per month than they are now.

If your primary interest is in doing something practical to help the housing market and therefore the broader economy, this refinancing program will help.

If your primary interest is in seeing homebuyers punished for their own bad decisions, in “seeing markets work”, in getting the federal government out of housing (a sector the federal government has been deeply embedded in for decades), and/or in maintaining a stagnant economy to maximize Republicans’ chances of winning in the fall, I suppose you should oppose this legislation.

From the NYT:

The White House plans to propose legislation that could allow a few million homeowners to reduce monthly mortgage payments by refinancing their current loans into new ones guaranteed by the Federal Housing Administration.

The program would broaden the availability of government-backed mortgages to include many borrowers whose loans are held by private companies and who have been unable to persuade those lenders to reduce their interest rates. Existing federal programs focus mostly on borrowers whose loans are owned by the government.

The new plan would require Congressional approval, a difficult hurdle for any legislation in the current polarized environment. Still, some Republicans have expressed support for expanding the availability of refinancing, and White House officials insisted that the plan was not an act of theater.

I’ll circle back around to this issue as the legislation moves ahead (hopefully).