Unable to get his jobs initiative or even pieces of it through Congress, President Barack Obama has little choice but to go around the stonewalling Republicans. The president announced revisions to a program Monday that will make it easier for homeowners with federally guaranteed mortgages to refinance even when they owe substantially more than their house is worth. The economy will not recover in Florida until the housing crisis eases, and anything that helps homeowners hold on to their biggest investment and puts a few more dollars in their pockets can only help.
Hamstrung by bureaucracy and strict requirements, the Obama administration's tepid efforts to help homeowners struggling to hold on to their homes have had a minimal impact. Less than 1 million homeowners have taken advantage of the 2-year-old Home Affordable Refinance Program, about a quarter of what had been projected. The idea is to help homeowners who have been making their payments on time but cannot take advantage of low interest rates and refinancing because their houses are not worth enough. But homeowners have been ineligible if they owe more than 125 percent of their house's market value, and that ruled out many Floridians and families in other states where values have plummeted.
The changes announced on Monday will eliminate that 125 percent rule next year so that more homeowners who are underwater can refinance as long as they are making their payments. Loan fees charged by Fannie Mae and Freddie Mac, which own or insure half of all home mortgages, will be reduced or waived. The requirement for new property appraisals also would be dropped in most of these refinancings. And other changes should make it easier for homeowners with second mortgages to refinance their primary mortgage. If millions of homeowners could refinance and lock in lower interest rates, they would be more likely to avoid foreclosure and could have more money to spend.
While median sales prices for existing homes in Florida are essentially flat from a year ago, the state's housing market is far from stabilized. Of the 10 worst cities in the country when comparing the size of mortgage debt to property value, five are in Florida — including Tampa. There are about 350,000 foreclosure cases clogging the state courts, and a panel created by the Florida Supreme Court has concluded that a mediation program designed to get borrowers and lenders to settle isn't working. The last thing Florida needs is another surge in home foreclosures, and Obama's efforts to make it easier for homeowners to refinance should help.
Given the connection between the housing market and the overall economy, there is an argument that government should go further. Even some conservative economists recommend that Fannie Mae and Freddie Mac refinance millions of mortgages across the board. Others argue that the only way to make a significant difference is to arbitrarily reduce the mortgage debt of millions of homeowners who are underwater to a more manageable amount. But such bold moves remain politically impractical at the moment and could pit homeowner against homeowner.
Congress has failed to help homeowners who are struggling to hold on to their homes, and the Republican candidates for president are more focused on tax cuts. But many families cannot wait for the outcome of the November 2012 election for help. Obama's modest effort to make refinancing mortgages easier for some homeowners is a positive step, but more needs to be done if Florida and the nation are going to do more than desperately tread water.