Administration Weighs New Refinance Plan as Housing Programs Falter

Rumors of a new government-led mortgage refinancing program have surfaced, and sources have confirmed that the White House is considering a refi push that will allow homeowners to lower their mortgage obligations by taking advantage of today’s low interest rates. Some industry experts see this move as a concession that the existing government housing programs aren’t working as well as planned. For example, after 16 months, the Home Affordable Modification Program (HAMP) is barely making a dent in the number of foreclosure filings. Interest rates are sitting at historic lows, and the government is looking to translate that into tangible savings for homeowners, which has sparked the discussions for a new refinance program. Details are not available yet, but it could come to light as early as mid-August, again through the FHA. The benefits of such a program could come at a cost. “Namely, a large portion of such efforts would be negated with high redefault rates expected on the refinanced loans, the bank said. Secondly, while a government-sponsored refi wave may help existing borrowers, it could penalize prospective new borrowers, as investors price in the potentiality of another government-driven refi wave in the future. And thirdly, refis would result in large losses for mortgage investors.”

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