Washington, D.C. — Today President Barack Obama highlighted an announcement by the Federal Housing Finance Agency, or FHFA, and the government-sponsored enterprises, or GSEs, Fannie Mae and Freddie Mac, that would allow some homeowners to refinance their mortgages at ultra-low rates.
Sarah Rosen Wartell, Executive Vice President of the Center for American Progress, issued the following statement:
Today the Obama administration announced welcome changes to the Home Affordable Refinance Program, or HARP, but some important details are still to come that will determine how much progress will be achieved. If implemented well, a retuned HARP could make a meaningful contribution to strengthening housing markets and the larger economy.
Specifically, the changes could help reduce the number of mortgage defaults and contribute to stabilizing housing markets by allowing current homeowners with mortgages backed by Fannie Mae or Freddie Mac to take advantage of the historically low interest rates to lower their monthly payments or pay off their loan sooner. The federal government is already on the hook for mortgages backed by Fannie Mae and Freddie Mac, so lower payments or faster pay offs reduce the risk of default and taxpayer loss. Fewer foreclosures, in turn, will help stabilize home values and improve the performance of mortgages held or guaranteed by Fannie and Freddie and thus reduce taxpayer exposure.
A retuned HARP also should contribute modestly to the larger economic outlook by putting a bit more money into the pockets of struggling homeowners, who are likely to spend it, or helping them to improve their family’s balance sheet. With interest rates on 30-year fixed-rate mortgages near 4 percent, refinancing may mean more disposable income for households or reduced leverage over time, which combined with a more stable housing market should help to increase economic activity and job growth.
The details are not yet fully spelled out. The take-up rate of the new program and its ultimate impact will depend on how well guarantee fees and other program measures are designed. I am hopeful that the Federal Housing Finance Agency, or FHFA, and the government-sponsored enterprises, or GSEs, including Fannie Mae and Freddie Mac, will not let new barriers to utilization prevent us from achieving the potential of today’s announcement.
CLICK HERE to read an analysis of the proposed changes to the Home Affordable Refinancing Program by CAP’s Sara Rosen Wartell, David Min, and Jordan Eizenga.
To speak with CAP experts on the issue, please contact Katie Peters at firstname.lastname@example.org or 202.741.6285.