Obama unveils mortgage refinancing plan

President Barack Obama holds up a proposed mortgage application form as he speaks at the James Lee Community Center in Falls Church, Va., Wednesday, Feb. 1, 2012. Obama outlined a proposal he proposed in his State of the Union address to allow homeowners with privately held mortgages to take advantage of record low rates, for an annual savings of about $3,000 for the average borrower.
AP Photo/Cliff Owen
President Barack Obama holds up a proposed mortgage application form as he speaks at the James Lee Community Center in Falls Church, Va., Wednesday, Feb. 1, 2012.
AP Photo/Cliff Owen

President Obama on Wednesday unveiled a proposal aimed at making it easier for Americans to refinance their mortgages, urging Congress to act on what he called a "make-or-break moment for the middle class."

Speaking to a crowd in Falls Church, Virginia, the president laid out a plan, originally outlined in last week's State of the Union address, he said would "give every responsible homeowner in America the chance to save about $3,000 a year on their mortgage by refinancing at historically low rates."

"What this plan will do is help millions of responsible homeowners who make their payments on time but find themselves trapped under falling home values or wrapped in red tape," he said. "If you're ineligible for refinancing just because you're underwater on your mortgage, through no fault of your own, this plan changes that. You'll be able to refinance at a lower rate, you'll be able to save hundreds of dollars a month you can put back in your pocket. Or you can choose those savings to rebuild equity in your homes - which will help most underwater homeowners come back up for air more quickly."

He also outlined what he called a "Homeowners Bill of Rights," or, "one straightforward set of commonsense rules of the road that every family knows they can count on when they're shopping for a mortgage."

That set of rules, aimed at protecting borrowers, would demand simple mortgages with no hidden fees; would put in place guidelines to prevent conflicts of interest damaging to homeowners; give support to families who are current on their payments; and provide protection against inappropriate foreclosure.

"No more hidden fees or conflicts of interest," Mr. Obama said. "No more getting the runaround when you call about your loan. No more fine print that you use to get families to take a deal that as not as good as the one they should have gotten. New safeguards against inappropriate foreclosures. New options to avoid foreclosure if you've fallen on hardship or a run of bad luck. And a new, simple, clear form for new buyers of a home."

The president recalled his and First Lady Michelle Obama's experience buying their first home together - a process he described, humorously, as so complicated that the two of them would end up looking through the forms and asking "what does this phrase mean?"

"And that's, you know, for two trained lawyers," he laughed.

He held up a one-page mock-up of what he wants such forms to look like in the future, and pointed to the Consumer Finance Protection Bureau (CFPB) as a means to achieving that end.

"Now that our new consumer watchdog agency is finally running at full steam, now that Richard Cordray is in as the director of the CFPB, they are moving forward on important protections like this new, shorter mortgage form," Mr. Obama said.

The goal, he said, was to make things "simple, not complicated," to protect consumers from getting "cheated."

"Terms are clear. Fees are transparent," he said.

The president painted his agenda as a stark contrast to that which Republicans favor.

"This, by the way, is what some of the folks in Congress are trying to roll back and prevent from happening," Mr. Obama said, referencing widespread Republican opposition to the power granted to CFPB to serve as a consumer watchdog agency.

"I guess they like complicated things that confuse consumers and allow them to be cheated. I prefer actions that are taken to make things simpler and easier to understand for consumers so that they can get the best deal possible - especially on the single biggest investment that most people will ever make," he said.

Another facet of the plan would turn foreclosed homes into rental properties because, as Mr. Obama noted, "that empty house or for sale sign down the block can bring down price of homes across the neighborhood."

"We're working to make sure people don't lose their homes just because they lost their job," he said. "These are steps that can make a concrete difference in people's lives right now."

Mr. Obama framed the issue to voters in personal terms.

"I've been saying that this is a make-or-break moment for the middle class, and this housing crisis struck right at the heart of what it means to be middle-class in America," he said. "Our homes, the place where we invest our nest egg, the place where we raise our family, the place where we plant roots in a community... It's personal. It affects so much of how people feel about their lives, about their communities, about the country, about the economy."

Taking an apparent swipe at Republican presidential candidate Mitt Romney, who in October told the Las Vegas Review Journal's editorial board that the government should not try to stop the foreclosure process but rather "let it run its course and hit the bottom," Mr. Obama argued that "it is wrong" to make responsible homeowners wait out the crisis.

"It is wrong for anyone to suggest that the only option for struggling, responsible homeowners is to sit and wait for the housing market to hit rock bottom. I refuse to accept that and so do the American people," he said.

"Government must take responsibility for rules of the road that are fair and fairly enforced. Banks and lenders must be held accountable for ending the practices that helped cause this crisis in the first place. And all of us must take responsibility for our own actions - or lack of action," Mr. Obama said. "So I urge Congress to act. Pass this plan. Help more families keep their homes. Help more neighborhoods remain vibrant. Help keep more dreams defended and alive. And I promise you that I will keep doing everything I can to make the future brighter for this community, this commonwealth, for this country."

When asked about Mr. Obama's proposal following the remarks on Wednesday, House Speaker John Boehner dismissed it as the latest in a series of failed pitches.

"One more time? One more time? How many times have we done this? We've done this at least four times where there's some new government program to help homeowners who have trouble with their mortgages," he said. "None of these programs have worked. And I don't know why anyone would think that this next idea is going to work."

Romney, meanwhile, suggested on Tuesday that Mr. Obama would have trouble getting re-elected due the state of the housing crisis. "If you are part of the housing crisis, you are probably not going to get elected president," he said.