President Obama's Mortgage Refinance Plan
DDA Mortgage • November 2, 2011
Mortgage refi plan targets hard-hit borrowers
By Steve Goldstein, MarketWatch
WASHINGTON (MarketWatch) — President Barack Obama on Monday unveiled a changed mortgage refinance plan that would allow homeowners who have suffered steep price declines on their properties to get cheaper loans.
The Home Affordable Refinance Program, the only program specifically designed for owners whose mortgages are worth more than the value of their homes, is being changed so that more Fannie Mae- or Freddie Mac-guaranteed mortgages could be refinanced. Use external link to see if Fannie Mae has guaranteed your mortgage. Use external link to see if Freddie Mac has guaranteed your mortgage.
With house prices nationally roughly a third below their peak, there are millions of borrowers who will potentially be eligible to refinance into mortgages near record lows — the 30-year carried an interest rate of 4.11% last week — rather than the mere 894,000 borrowers who have used the program so far.
“These are important steps that will help more homeowners refinance at lower rates, save consumers money and help get folks spending again,” Obama is due to tell an audience in Las Vegas, the city with the highest foreclosure rate in the country. Nevada is the only state which cumulatively is underwater on mortgages.
The new plan does have its limitations: it will require homeowners to be current on their payments and it’s only for loans sold to Fannie or Freddie by May 31, 2009. And of course, not all loans are backed by the housing giants, though state attorneys-general are separately negotiating a settlement with the nation’s top lenders that may include an element of mortgage modification.
“Given the magnitude of the housing bubble, and the huge inventory of unsold homes in places like Nevada, it will take time to solve these challenges,” Obama admitted, according to prepared remarks.
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The Federal Housing Finance Agency, the regulator for Fannie Mae and Freddie Mac, estimates that refinancing could double under the program. Even so, the program would go only a small way in addressing the roughly 11 million homeowners who are underwater.
To spark interest in HARP, the program will lower fees, eliminate the current 125% loan-to-value ceiling, waive lender warranties and eliminate the need for property appraisals.
White House officials say the refinancing could save owners about $2,500 each year.
Gene Sperling, the director of the National Economic Council, said the key element of the plan is the removal of reps and warranties. “Removing reps and warranties has the potential to unleash competition for housing refinance,” Sperling told reporters on a call.
The industry embraced the initiative.
“Lenders are particularly gratified that the refinements will provide relief from some representations and warranties that lenders face when originating new loans,” said David Stevens, president and chief executive of the Mortgage Bankers Association. “These changes alone should encourage lenders to more actively participate in HARP.”
He cautioned that “it will take a bit of additional time” even after FHFA guidelines are introduced in November to implement them.
Politically, the plan is the start of a once-a-week effort to show the Obama administration can get things done even when legislative efforts are blocked in Congress, according to the New York Times.
For the economy as a whole, the program is seen having only a limited impact.
Yelena Shulyatyeva, an economist at BNP Paribas, calculates that the program could leave to savings on the order of $2.75 billion — or 0.02% of annual disposable income.
“While the households that benefit will see an increase in disposable income of as much as 5% as a result of lower mortgage payments, in the aggregate, the direct impact is not material from a macroeconomic point of view,” she said in a note to clients.
“This would hold even if the program is more successful than the FHFA anticipates. Nevertheless, indirect benefits of the plan include further lowering delinquency rates and alleviating bank losses to a modest degree.”
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That Redfin data point—$13 trillion in housing wealth held by Americans 70+—is a big deal, and it ties into several powerful trends reshaping the housing and mortgage markets. What’s driving this record wealth? 1. Long-term home price appreciation Older homeowners bought decades ago at much lower prices and have benefited from massive appreciation, especially post-2020. 2. Low mortgage leverage Many in this age group either: Own their homes outright, or Have very small remaining balances So their equity = real wealth , not just paper gains. 3. Aging in place Instead of downsizing, many are staying put longer, allowing equity to continue compounding. Why this matters (big picture) 1. Supply constraint in housing Fewer older homeowners are selling, which: Keeps inventory tight Supports higher home prices This is one reason younger buyers are struggling to find affordable homes. 2. Wealth inequality across generations Younger generations: Face higher home prices Have less access to equity Meanwhile, older Americans control a disproportionate share of housing wealth. Implications for mortgage and lending 1. Rise of equity-based lending This trend directly fuels growth in: Reverse mortgages (HECMs) HELOCs Cash-out refinances That $13T is largely untapped liquidity . 2. “Living off equity” becomes more common With concerns around: Social Security stability Inflation More retirees are using housing wealth as: Income supplementation Emergency reserves 3. Intergenerational wealth transfer We’re seeing more: Parents helping kids with down payments Early inheritance strategies using home equity The hidden risk This isn’t risk-free: If home prices flatten or fall → equity shrinks Property taxes + insurance (especially in places like Florida) can pressure fixed-income retirees Liquidity is still “locked” unless accessed strategically Bottom line That $13 trillion figure isn’t just a stat—it represents a shift in where wealth lives in America : Housing is now the primary balance sheet asset for older Americans It’s becoming a retirement tool , not just a place to live And it’s quietly shaping everything from housing supply to lending innovation  Didier Malagies nmls212566 DDA Mortgage nmls324329
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