Home Affordable Refinance Program Revamped

Kimberly Watson, Editor in Chief
October 24, 2011 /

After having faced left-and-right criticisms for not acting swiftly on the US housing crisis, President Barack Obama on Monday introduced an overhauled home affordable refinance program in an attempt to mitigate economic and political woes.

Obama made the announcement in Las Vegas as he is seeking a second term, uttering another theme for his campaign such as “we can’t wait” and “where they won’t act, I will.” This is the first stop of Obama’s three-day tour in Nevada, the “ground zero for the damaging effects of his failed economic policies,” according to Republican National Committee Chairman Reince Priebus.

Obama blamed the Congress for an aggravated housing fallout, which was also used by Republicans to throw his administration in confusion.

Economists blamed the housing problem as the major culprit of the 2008 global financial meltdown. In addition, unemployment, depressed wages and mortgages overwhelming house values lumped together continued to strangulate the economy.

The housing woes added fuel to Obama’s separate strife in Congress where his jobs proposal is battling opposition from Republican lawmakers, whose actions he blamed for a weak stimulus on economic recovery.

The Federal Housing Finance Administration estimated that 1 million people would qualify for the revamped home affordable refinance program. On the other hand, Moody’s Analytics put the figure at 1.6 million.

The overhauled home affordable refinance program is expected to help borrowers with little or no equity in their homes to seek refinancing and take advantage of lower rates. Currently, these homeowners are stuck to 6-7 percent mortgage rates.

Under Obama’s proposal, homeowners who are still current on their mortgages would be able to refinance regardless of the drop in their home value. However, Obama admitted to his incapability of solving these challenges in a short period of time “gven the magnitude of the housing bubble, and the huge inventory of unsold homes in places like Nevada.”

In Nevada, one in every 118 homes received a foreclosure notice in September, the highest ratio in the country, according to RealtyTrac, a foreclosure listing firm.

Meanwhile, Standard & Poor’s outlook for the U.S. homebuilder sector is stable to slightly negative.

According to Beth Ann Bovino, senior economist at Standard & Poor’s Ratings Services, the builders that have survived this tough cycle continue to recalibrate their operations, products, and pricing to contend with weak buyer demand, changing housing preferences, and competition from foreclosed homes that are being re-marketed for sale.

Bovino said: “We believe single-family housing starts and sales have likely troughed, and most rated builders are gaining market share, albeit of a much smaller pie. The anemic and protracted nature of this recovery, however, could jeopardize companies’ currently adequate liquidity positions–a key support to ratings as long as sustainable profitability remains elusive.”

Real GDP growth will be positive but less than 2010′s 3 percent growth rate, according to S&P. Unemployment rates will remain elevated, while consumer confidence weak.

Additionally, total housing starts and home sales will modestly improve but will remain well below historical levels. Foreclosure inventories will remain high, pressuring home prices, and mortgage rates will remain low, but stringent underwriting and appraisal standards will reduce the pool of qualified buyers.

“Our baseline scenario for 2012 assumes that the U.S. economy will avoid a second recession,” Bovino added.

“However, the stalled domestic recovery and continued economic issues abroad raise the odds for a double dip. As such, we see rated homebuilders facing another year in which they must carefully juggle a desire to invest in new, more profitable communities with the need to preserve liquidity positions, given weak near-term profit prospects and debt maturities that will begin to build in 2013.”


1 Comment for “Home Affordable Refinance Program Revamped”

  1. SD

    Does S&P have any expertise. After their inflated ratings on all those mortgage backed securities, they should remain shut forever. These people cannot forecast anything and Bovino is a bad economist. Cannot stomach these incompetent people anymore.

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