The U.S. government needs to do more to help homeowners stay in their properties, including exploring options for principal forgiveness with mortgages held by Fannie Mae and Freddie Mac, according to David H. Stevens, chief executive officer of the Mortgage Bankers Association.
Principal reductions and programs that lower interest and payment rates, would place “cash flow into the hands of families,” Stevens, a former Federal Housing Administration commissioner, said today in an interview on Bloomberg Television’s “Bottom Line” with Mark Crumpton.
President Barack Obama today unveiled his latest plan to help the housing market by lowering mortgage insurance premiums for borrowers who refinance loans. While Obama and Federal Reserve Chairman Ben S. Bernanke have called for principal reductions by Fannie Mae and Freddie Mac, the two government- supported mortgage companies, their overseer says it would result in untenable losses for the lenders.
Forgiving mortgage debt on Fannie Mae and Freddie Mac loans would cost the taxpayer-funded companies almost $100 billion, Edward DeMarco, the acting director of the Federal Housing Finance Agency said in a Jan. 20 letter to Representative Elijah Cummings, a Maryland Democrat who had threatened to subpoena the information.
The FHA said today it will streamline its refinance program to save a typical borrower about $1,000 a year, according to a fact sheet distributed by the Obama administration. It will reduce up-front premiums to 0.01 percent of the total loan amount from 1 percent. Annual fees will be cut to 0.55 percent from 1.15 percent for borrowers with FHA loans made before June 1, 2009. As many as 3 million borrowers may benefit from the changes, the FHA said.
“I’m not one of those people who thinks we should just sit by and wait for the housing market to hit bottom,” Obama said today at a news conference at the White House. “There are real things we can do right now,” he said, noting that the changes don’t require congressional approval.
Under Obama’s new plan, relief will also be provided to veterans under the Servicemembers Civil Relief Act and would provide families a minimum of $116,000 if they were wrongfully foreclosed upon.
“This is the right step to take for servicers who didn’t comply appropriately,” Stevens said. “There is nothing more important than Americans who put their lives at risk for our country.”
To contact the reporter on this story: Christine Harvey in New York at Charvey32@bloomberg.net
To contact the editor responsible for this story: Rob Urban at firstname.lastname@example.org