NJ Lenders, Consumer Group Hail New Obama Effort To Help Housing Woes

The Record ( — Monday, October 24, 2011

The Record

New Jersey lenders and the head of statewide consumer group that counsels distressed homeowners praised the Obama Administration's latest effort to curb foreclosures.

The Federal Housing Finance Agency said Monday it will eliminate fees and relieve banks of certain risks to make it easier for perhaps more than a million homeowners who owe much more than their homes are worth to refinance into loans with lower rates.

"This is a good preventive measure," said Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, which provides counseling services for homeowners. "Hopefully it will prevent some folks from going into foreclosure."

"It's a very significant event for our mortgage lenders and brokers," said E. Robert Levy, president of the New Jersey Mortgage Bankers Association. "It opens up the door for a lot of folks to be able to refinance who would not otherwise be able to refinance."

The plan expands the Home Affordable Refinance Program, which was introduced in 2009 and was limited to borrowers whose mortgages were no greater than 125 percent of the value of their homes. The new plan removes that cap so lenders who sell loans they originate to government-sponsored enterprises Fannie Mae and Freddie Mac will be able to approve some loans they would otherwise have to reject.

Homeowners must be current on their payments to qualify.

"A lot of people come into us for help before they get a foreclosure notices but we really can't do anything for them because they have no equity in their house, so this will help those people," Salowe-Kaye said.

The refinancing program applies to homeowners whose mortgages were sold to Fannie Mae or Freddie Mac on or before May 31, 2009. The program was originally going to end next June, but it is being extended until the end of 2013.

While the White House tried to avoid predicting how many homeowners would benefit, the Federal Housing Finance Administration estimated an additional 1 million people would qualify for refinancing. Moody's Analytics say the figure could be as high as 1.6 million.

Homeowners in states where property values have declined the most will benefit most, but "New Jersey homeowners will certainly benefit," Levy said.

According to the Santa Ana, Calif.-based data and research firm CoreLogic, 16 percent of New Jersey mortgages were underwater as of June 30.

Nevada had the highest negative equity percentage with 60 percent of all of its mortgaged properties underwater, followed by Arizona at 49 percent.

"I think most people who are able to refinance have tried to, but this opens it up to another category of borrowers," said John McWeeney, president of the New Jersey Bankers Association.

"You have to have respect for a lot of these homeowners who are paying their mortgage on time even though the value of their house has declined," McWeeney said. "This gives those people the chance to take advantage of what are historically low mortgage rates right now," McWeeney said.

Salowe-Kaye said she would like the government to go further to prevent more foreclosures by persuading lenders to share in the loss of equity by forgiving portions of underwater loans. "Principal reduction is what is really needed," she said.

Lenders have vigorously opposed such proposals.

This article contains material from the Associated Press and Bloomberg News.

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