It is hardly a secret that the Obama administration’s programs to bolster the housing market and help struggling homeowners have failed to meet expectations — Obama admitted so himself last year, when he said his administration was “going back to the drawing board” to expand those programs. The slow progress in housing, as the New York Times detailed today, has “remained a millstone” around the economy’s neck, even though the programs have helped millions of homeowners: the Home Affordable Refinance Program (HARP) and Home Affordable Modification Program (HAMP) have helped more than 3.6 million people refinance or modify existing loans.
More homeowners have received assistance through reforms and changes made to the private modification and refinancing process, and even more are sure to benefit from the $25-billion mortgage settlement between large banks and the federal government and state attorneys generals reached this year. But even as the housing market has begun to show signs of life in recent months, there are ways in which Congress and the administration could help boost the housing market right now:
Pay for principal reductions: Edward DeMarco, the acting director of the Federal Housing Finance Agency, recently turned down an offer from the Obama administration to help pay for principal reductions on loans backed by Fannie Mae and Freddie Mac. DeMarco’s primary concern is price; his agency has approved principal reductions in the past when someone other than Fannie and Freddie fronted the whole bill. So the Treasury Department can bypass this hangup by offering to pay for certain principal reductions in full, as the Center for American Progress’ John Griffith has written. This could help hundreds of thousands of underwater homeowners avoid foreclosure and would not require any new funding, thanks to unspent funds from HAMP and the Treasury’s Hardest Hit Fund.
Streamline existing refinancing programs: Streamlining and better utilizing two programs already in existence — the Home Affordable Refinancing Program and the Federal Housing Administration’s Short Refinance program — could further aid the housing market. Small changes that, again, would not cost taxpayers more money could be made to HARP and the Short Refi program to make refinancings available to more homeowners, helping some of the millions of underwater homeowners that are locked in at above-market rates by reducing their mortgage payments by an average of $2,600 a year.
Seek new ways to increase refinancings: Roughly 3.2 million underwater homeowners are current on their monthly payments but cannot refinance to today’s historically low rates, simply because their loans are ineligible for current government programs. Sens. Dianne Feinstein (D-CA) and Jeff Merkley (D-OR) have each proposed new programs that seek to help these borrowers refinance, and the Obama administration has indicated that it would consider both proposals. President Obama proposed a program similar to Feinstein’s in his three-pronged refinancing plan earlier this year, while Treasury Secretary Timothy Geithner said that he’d like to work with Merkley to test the proposal through a pilot program, assuming they have the legal authority to do so.
While Obama’s programs haven’t succeeded the way he hoped, he hasn’t received much help from congressional Republicans, who have consistently and repeatedly blocked efforts to address the housing crisis. Obama, at least, has attempted to help the housing market, something House Republicans can’t say: their budget, in fact, would derail the recent progress the housing market has made. The nation’s biggest banks haven’t helped either, using predatory and often illegal practices to foreclose on a countless number of homeowners, prolonging the pain the housing crisis has caused.