Obama pitches refinance plan for homeowners

WASHINGTON — President Obama on Thursday touted his administration's efforts to lower mortgage rates in a round-table discussion with Washington, D.C.-area homeowners who have benefited from refinancing into more affordable loans.

Their stories were intended to serve as testimonials for the masses who have not called a mortgage broker, whether they are in danger of foreclosure or simply looking for extra money.

Applications for refis have increased 88 percent since February, according to the Mortgage Bankers Association. And Fannie Mae, a mortgage-financing company, has said its refinancing volume jumped to $77 billion in March, twice the level of the previous month.

"The main message we want to send today is that the programs that have been put in place can help responsible folks who have been making their payments, who are not looking for a handout, but this allows them to make some changes that will leave money in their pockets and leave them more secure in their homes," Obama said.

Obama said new housing programs would be presented soon, following last month's plan to provide $275 billion to help distressed homeowners, of which $75 billion would subsidize the mortgage industry to help borrowers avoid foreclosure. But he offered no details Thursday.

The refinancing boom has been fueled by lower mortgage rates. The average rate on 30-year fixed notes was 4.87 percent Thursday, slightly higher than the 4.78 percent last week. Still, it was the lowest level since 1971, which the president used to bolster his two-pronged argument for why refinancing is so important.

First, families will have more money to spend, which will boost the economy. If that happens, home values likely will rise, which will begin rehabilitating the beleaguered housing market that contributed significantly to the economic collapse.

Despite the uptick in refis, the administration's housing program has yet to have a significant impact, and homeowners with jumbo mortgages still struggle to take advantage of lower rates.

Obama's focus was intended simply to draw attention to a government Web site that tells people if they are eligible to refinance their mortgages.

"We hope that everybody takes advantage of it. The Web site is makinghomeaffordable.gov — is that right?" Obama said, repeating the address five times in five minutes. "So get on the Web site, find out what's available."

Refi with little equity

The federal program Obama launched last month allows borrowers with little or no equity in their home to refinance. Under that program, borrowers are eligible if they owe no more than 5 percent more than the home is worth and have a mortgage backed by Fannie Mae or Freddie Mac.

Lenders began delivering refinanced loans under that program to Freddie Mac on April 1, and 20 lenders had submitted applications within 48 hours. Fannie Mae received "several thousand" applications Monday when its computer systems were updated for the program.

But not all banks have implemented the program. Bank of America and Wells Fargo began offering the refinance program this week to many homeowners. But both are excluding homeowners with mortgage insurance.

Citigroup said it would begin taking refinancing applications for loans owned or guaranteed by Fannie Mae on Saturday but has not set a date for beginning to take applications for Freddie Mac loans. SunTrust began offering the refinanced mortgages to Fannie Mae-backed mortgage holders Monday but will not expand it to include loans back by Freddie Mac until May.

And it is taking even longer for some lenders to launch the foreclosure-prevention part of Obama's housing program.

Under that program, the government will pay lenders to reduce payments of troubled homeowners to affordable levels. That effort also was launched last month. But Bank of America, one of the country's largest lenders, for example, will begin offering those modifications "in the next two weeks," according to a company statement.

Scam warning

In the flood of refinancing opportunities, Obama issued a warning about opportunists who are trying to make a quick buck.

"We're starting to see some scam artists out there who are contacting people," Obama said. "I just want everybody who is watching today to know that if somebody is asking you for money upfront before they help you with your refinancing, it's probably a scam."