Obama mortgage plan looks dead on arrival

President Barack Obama holds up a proposed mortgage application form as he speaks at the James Lee Community Center in Falls Church, Va., on Feb. 1, 2012. / AP Photo/Cliff Owen

COMMENTARY President Barack Obama's new mortgage plan is smart and potentially very effective. It would make it possible for 3.5 million homeowners to save money by refinancing at lower interest rates. The money saved could spur the economy in other ways and the plan shouldn't cost the government anything. Too bad it will never make it out of Congress.

The plan, unveiled today, would let qualified homeowners refinance mortgages at the current historically-low interest rates. The new refinance measure covers not only home loans guaranteed by federal mortgage giants Fannie Mae and Freddie Mac but also those owned by private investors. This group - estimated at 3.5 million people -- have been unable to qualify for refinancing, either because their homes have lost so much value or their credit ratings aren't high enough. Currently some 11 million households are underwater, owing more on their homes than the properties are worth.

In order to qualify for the program, borrowers would have to have a minimum credit score of 580 and a loan that falls within the Federal Housing Administration's limits, which range from $271,050 to $729,750. They would also have to be current on their last six mortgage payments and have no more than one delinquency in the previous six months. The FHA would guarantee the loans.

If enacted, the program is estimated to cost between $5 billion and $10 billion. The administration wants to pay for this with new fees to be levied on financial firms with more than $50 billion in assets. In his State of the Union speech Obama said doing this "will give those banks that were rescued by the taxpayers a chance to repay a deficit of trust."

The plan was clearly carefully crafted to address issues that have derailed earlier efforts. The loan qualifications were designed to weed out speculators and the proposed fee would keep it from adding to the federal deficit. Despite this, the plan is being given little chance of becoming law. Congress has refused to act on similar fee requests twice in the last two years.

Although the plan's failure could be bad news for some homeowners in need, it could still be good news for President Obama's re-election efforts. The president has been campaigning as the alternative to the much-loathed do-nothing Congress. The plan's failure would underscore that in key electoral battlegrounds - like Florida, Nevada, Arizona and Ohio - which are home to many of the nation's weakest property markets. 

[Davidewi]

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[Exposinghotair]

This is nothing more than election year campaign fodder for the ignorant classes, i.e. those who voted for Obama or are dumb enough to consider doing so. The federal government makes a mess of everything on which it gets its hands. Obama has tried to perpetuate the false narrative that the housing bubble and subsequent collapse were all the result of those evil capitalist bankers. This is because he is a Marxist demagogue and he needs villains, just as Stalin and Hitler needed villains to win over the masses. Neither the bubble nor the crash would have happened had not the federal government intervened by policies designed to get everyone into a home regardless of income or credit worthiness. That was pure lunacy. Sure, President Bush could have tried harder to rein-in Fannie and Freddie, but Barney Frank had sufficient leverage to prevent needed reforms of those mortgage giants. And Obama persists in promoting similar schemes to keep people in homes they cannot afford. He is doing the same thing with college loans and grants, which will just drive colleges to raise tuition and other costs, as they have for the past 40 years. But if you believe Obama, you will believe he's going to ride herd on those colleges that raise costs inordinately. This is just like his assertion in 2009 that he was going to keep an eye on governmental bodies that misspent stimulus funds. Dream on. These are nothing less than vote buying schemes using our hard-earned tax dollars. Obama's mortgage plan is fodder for the booboisie, of which Constantine von Hoffman is a charter member.

[HurtinginFlorida]

I was pretty excited to hear about the plan originally. But now, seeing all the 'prerequisites' for getting the help... they are still going to limit the people that it can help... big time. No middle class people I know has a house mortgage of even close to $271,050 to $729,750. And late once in the past 6 months?? Give me a break. If your really in need, your going to have more late payments than that! I do! And I've been told I can't get assistance. I struggle to make my payment and keep my house every month, through my pay cut, lowered hours, and in school full time for something better. My loan isn't backed by the government, and my credit score is slowly going lower and lower. But, I'm not asking for anything, but is it fair to exclude the true 'middle class' people out there with private mortgages that really need help. If the government is going to do it, then they need to do it right, or not at all. The banks are destroying the American Dream. Getting a house is no longer even an option for most Americans. I can only hope that I can hold on to mine, so that I have something for my son to live in one day.

[umdala]

If they banks can have their bailout, then surely the gov't can make it easier for me to refinance my mortgage - unlike the banks, I didn't create debt instruments I didn't understand the risk of, nor did I loan money as if it was going out of style, which enabled those to borrow who wouldn't have been able to otherwise; so, when the house of cards fell, only the banks get relief? Good luck convincing those of us who can do the math that Obama is just pandering for votes - we all deserve some assistance not just fat cats who make bad policy for their corporations.

[Wellinformed1]

The banks paid back federal money with interest. It was a loan not a social program and one of the best return on investments the gov has made in a long time. You agreed to your loan when the bank gave you the money. Why don't you agree to the terms now?

[WeeWeedUp]

>>"will give those banks that were rescued by the taxpayers a chance to repay a deficit of trust."<<

Keep in mind the biggest banks have already paid back their TARP money - every single penny plus an additional $40B in interest and dividends. The problem here is President Foodstamps. He BORROWS over $4B each and every single day. So President Foodstamps blew through the banks' repayment of their 'deficit of trust' in less than 10 days. I believe the big banks' slates are clean. I'm ready for President Foodstamps to start repaying his deficit of trust and stop lying to us about anything and everything. Worst. President. Ever.

One and Gone, 2012!

[Wellinformed1]

Yes. Let's get this "I don't understand anything about economics or business welfare promoting goof" out of office ASAP.

[Njericlark]

You guys will be the first one crying when you lose some benefit that the President wants to pay for. You Keep complaining about spending, but it's the spending that pays for roads, schools, infrastructure and more. What do you think he wants to spend money on? If you think all government spending is going on "foodstamps" you are dumber than I think you are.

[ghardenb2]

What's not to like about this? Stem foreclosures, free up spendable money for homeowners, extend help to include those whose mortgages are not federally owned and do it all without busting the federal budget.
With that much going for it, the repubs won't dare let it see the light of day. Think about that folks!

[Wellinformed1]

If you increase fees n lenders and their cost of doing business goes up guess what happens? Their product prices go up.- just the same as high oil prices increase food deliver cost from farm to market and food prices increase. So if rates go up b/c Mr Welfare keeps increasing business costs, then what good does that do for people looking for lower rates? They won't be so low. But wait- you're probably thinking the Federal Reserve just said they are keep rates low for a long time... Well the Fed doesn't control mortgage rates they control fed funds target rate and over night lending rates between banks. Market dynamics dictate long term debt yields "mortgage rates" the Republicans understand these economic variables. Obama just thinks you are all dumb and will support him after his "I think your dumb enough to fall for this" no chance of passing bill is denied.

[CapitalistInfidel]

"will give those banks that were rescued by the taxpayers a chance to repay a deficit of trust."

Does Obama not see the irony? Over 1.1 million dollar federal deficit and he's worried about the banks "deficit of trust?"

[SaveRMiddle]

It was clearly never proposed to pass. It was Unveiled for the guaranteed obstruction. It also asks us to pretend lenders would be willing to pay billions in "fees". Our intelligence is being insulted.

[SaveRMiddle]

It was clearly never proposed to pass. It was Unveiled for the guaranteed obstruction. It also asks us to pretend lenders would be willing to pay billions in "fees". Our intelligence is being insulted.

[credibility2]

I'm not in favor of only certain types qualifying for something like this. Either every mortgage holder benefit, or none benefit. It's discriminatory. Our president is once again unrealistic and too myopic in his vision, which lacks clarity.

[starving1968-3]

The people want to refinance, but the companies won't let them.

The PEOPLE are being discriminated against, this law will change that, and you think it shouldn't happen BECAUSE "it's discriminatory"?

Try reading the article BEFORE you post your comments next time....

[Osprey4]

Most people who want to refinance already have. The problem is that the law would only apply to "responsible" homeowners. But the majority of problem mortgages are not only under water but in arrears. This plan does not help.

There is no substitute for letting the housing market correct itself until values return to reasonable levels. Those who are under water should never have bought into the housing myth, and things can only get better if those people get out.

There are many responsible individuals and families who would benefit from further correction. Let the market bottom out, and those who've been patient will be rewarded. And the real estate market can return to some semblance of its former self.