Obama’s Mortgage Refinancing Aid, Who Really Benefits

16 07 2009

Obama’s Mortgage Refinancing Aid, Who Really Benefits

Posted by: admin in mortgage industry

Obama’s Mortgage Refinancing Aid, Who Really Benefits?

Obama’s administration latest efforts to protect and aid family’s that cannot pay their mortgages and are in serious risk to foreclose aims to help 9 million home owners and further measures intend to provide information and advice to home owners on mortgage refinancing and on mortgage options to home buyers.

What are the effects of these measures and who really benefits from them?

Obama’s refinance and modification program could help as we said up to 9 million homeowners to reduce their monthly payments to an affordable level. The program does not stop there, aiming to provide 5 million homeowners with aid through government owned Fannie Mae and Freddie Mac as well as earmarking $75 billion to prevent foreclosures.

What has happened up to now? Up to date it seems (reliable stats are still to be produced due to the lack of a tracking system) around 200,000 borrowers have received the option for trial modifications according to the U.S Department of Housing and Urban Development, HUD.

This is great news for the 200,000 that benefited but still a far cry from a real solution. It is early days to bury the program but the predictions of the Mortgage Bankers Association are not promising. The MBA says that the government’s expectations are unrealistic and that lenders will only make $2.03 trillion from mortgages this year, not even close to the associations forecast for this year which was $750 billion more than the estimated amount.

Why is this the case when the U.S government is investing hand over fist in mortgage backed securities and printing money like it’s going out of fashion to invest in banks. The banks will say that the increase in interest rate is negating the government’s efforts while others blame the fact that banks have little incentive to speed up the financial aid procedures and that there is not enough control from the government. It does seem like banks are getting a pretty good deal being provided with cash to invest in government backed mortgages, a win-win situation for the lender.

On the other hand the borrowers that need the aid to continue living in their home are facing long procedures that stretch for months and months with no guarantee of a clear answer after the ordeal.

Another glitch in the mortgage refinance aid is that it seems to ignore those that are worse off with upside down mortgages. Although the latest aid packages have included mortgages that are up to 125% of the current value of the house this only applies to Fannie and Freddie backed mortgages that do not have a very large presence in the worst hit areas like California and Las Vegas to mention two.

Obama’s Mortgage Refinancing Aid, Who Really Benefits

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