President Obama delivers his State of the Union address to Congress, in… (Brendan Smialowski/Getty…)
President Obama outlined steps that could affect the nation’s housing market in a State of the Union address that focused heavily on economic issues.
Perhaps most likely to affect current homeowners, if it can pass through a divided Congress, is a plan the president said would allow more homeowners to take advantage of historically low interest rates and refinance their mortgages.
“I’m sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates,” Obama said Tuesday night. “No more red tape. No more runaround from the banks.”
The president said that a fee on the nation’s financial institutions would pay for the plan. The proposal is an expansion of an initiative revamped last year called the Home Affordable Refinance Program, which eased rules and reduced fees to allow many more homeowners with loans owned or backed by Fannie Mae and Freddie Mac to take advantage of low mortgage rates.
The president’s proposed plan would expand the universe of borrowers eligible for refinancing to those whose mortgages are not backed by the two entities and are current on their loans. The plan would not require banks to offer borrowers a chance to refinance, but would clear away certain barriers that impede them, according to senior administration officials who were not authorized to speak publicly.
Jed Kolko, chief economist and head of analytics at real estate website Trulia.com, said other potential government initiatives such as turning foreclosures into rentals or increasing loan modifications would “help the housing market more directly.”
“This is primarily economic stimulus,” Kolko said. “It puts money in the pockets of people with mortgages. It won’t impact the housing market much. Underwater borrowers will remain underwater, and you need to be current on your payments to refinance.”
The president also said he would create a mortgage crisis unit that will probe the misconduct leading up to the housing bust.
“This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans,” Obama said. “A return to the American values of fair play and shared responsibility will help us protect our people and our economy.”
The office will be a new unit in the president's Financial Fraud Enforcement Task Force and chaired by New York Atty. Gen. Eric Schneiderman, according to a person familiar with the initiative who was not authorized to speak publicly on the matter.
Schneiderman has been the most vociferous critic of a proposed settlement of up to $25 billion involving state attorneys general, federal agencies and the mortgage industry over foreclosure and mortgage servicing abuses.
"The American people deserve a robust and comprehensive investigation into the global financial meltdown to ensure nothing like it ever happens again, and today's announcement is a major step in the right direction," Schneiderman said Tuesday night in a statement.