WASHINGTON — President Obama, meeting with homeowners at the White House, said the government's efforts to drive down interest rates had fueled a surge in refinancing -- putting money into many homeowners' pockets during the current economic crisis.
But almost all the refinancing so far involves borrowers with conventional mortgages who are not in serious financial trouble. The president's own programs for helping troubled homeowners are just beginning to get off the ground.
Fannie Mae, the larger of the two government-sponsored mortgage financing arms, just began accepting automated applications from mortgage lenders Monday, said spokeswoman Amy Bonitatibus.
By Thursday, fewer than 1,000 loans had been refinanced under the program, though the pace is expected to pick up dramatically in the weeks ahead, according to the Treasury Department.
Turning his focus to the economy Thursday, his first day back from a foreign trip, Obama used the White House economic round table with homeowners to laud the surge in mortgage refinancing as "good news" for American families in the midst of the gloom of the recession.
He credited "some extraordinary actions by the Federal Reserve," which in March began aggressively buying mortgage-backed securities in an effort to lower mortgage rates, as well as his own housing relief plan, announced in February.
Mortgage rates are near historic lows, with the average rate on a 30-year mortgage at 4.87% this week, according to Freddie Mac.
Though economists mostly have credited the Federal Reserve's actions for the lower interest rates, Obama economic advisor Austan Goolsbee also pointed to a $200-billion credit line the administration announced in February for Fannie Mae and Freddie Mac. Goolsbee said the credit line had helped raise investors' confidence in mortgage-backed securities.
Mortgage refinancing applications are up 15% since the beginning of the year, according to a weekly survey by the Mortgage Bankers Assn. Obama noted that the same survey shows an even bigger jump in refinancing applications -- 88% -- since the week he announced his mortgage relief plan in mid-February.
Orawin Velz, an economist with the bankers trade group, said lenders were still insisting on high credit standards for borrowers, with good mortgage payment histories and equity left over in their homes.
"Right now, it's become a lot more stringent," Velz said.
