Obama urges families to refinance mortgages
President also cautions against scams, con artists
WASHINGTON - Declaring "good news" in the midst of an economic meltdown, President Obama yesterday urged families to take advantage of near-record-low mortgage rates by refinancing their home loans.
"We are at a time where people can really take advantage of this," Obama said, seated with a handful of homeowners who have already lowered their bills.
But he also warned people to watch out for scam artists, cautioning, "If somebody is asking you for money up front before they help you with your refinancing, it's probably a scam."
Rates on 30-year mortgages inched upward this week but remain near the lowest level in decades, allowing borrowers with strong credit and stable jobs to save money if they refinance.
The average rate on a 30-year fixed-rate mortgage rose to 4.87 percent this week, up from 4.78 percent last week, Freddie Mac reported yesterday.
Low rates have sparked a surge in refinancing activity, with nearly 80 percent of new home loan applications coming from borrowers seeking to refinance. Freddie Mac's sibling company, Fannie Mae, refinanced $77 billion in loans last month, nearly double February's volume.
Yesterday, Housing and Urban Development Secretary Shaun Donovan said banks receiving federal aid through the Troubled Asset Relief Program must take part in the government's mortgage modification initiatives.
The federal government is "going to require as a condition of participation in TARP going forward that banks do participate in" the Obama administration's Making Home Affordable plan, Donovan said.
As of last month, only government-seized mortgage finance companies Fannie Mae and Freddie Mac were participating in the program, Pat Lawler, the chief economist of the Federal Housing Finance Agency, told a House committee on March 19.
"Every indication" is that private banks will participate, Donovan said yesterday. Bank of America said yesterday that it would participate in the program. In recent weeks, nearly 200,000 homeowners have contacted Bank of America to find out if they are eligible to refinance under the new guidelines, said Vijay Lala, the bank's product management executive.
The modifications, which target 3 million to 4 million homeowners facing foreclosure, would require lenders to cut interest rates, extend repayment terms, and forbear or forgive principal payments to reduce homeowners' monthly payments to a more affordable level. Since Obama disclosed his plan in February, refinancings have risen 88 percent and mortgage rates have dropped to record lows, Donovan said.
The program applies only to loans owned or guaranteed by Fannie and Freddie, which together account for about 56 percent of the 55 million residential mortgages outstanding in the United States.
Foreclosures and defaults continue to break records. A record 5.4 million American homeowners with a mortgage, or nearly 12 percent, were at least one month late or in foreclosure at the end of last year.