Obama Urges Congress to Act on Refinancing Proposal

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

President Barack Obama is urging Congress to act on a proposal that would allow homeowners to refinance at historically low rates, with the cost of the $5-10 billion plan fully offset by using a portion of the administration’s proposed fee on the largest financial institutions.

Speaking Feb. 1, 2012, Obama elaborated on the plan he first announced in his State of the Union address last month. The broad-based refinancing plan is expected to save homeowners who are current on their payments an average of $3,000 per month, giving borrowers the chance to rebuild equity in their homes.

Obama also proposed a Homeowners Bill of Rights, which he described as a “straightforward set of commonsense rules of the road that every family knows they can count on when they’re shopping for a mortgage.” The Bill of Rights would include access to a simple mortgage disclosure form, full disclosure of fees and penalties, as well as support to keep responsible families out of foreclosure.

Additional steps announced by Obama include a pilot to transition foreclosed homes into rental housing. The pilot would be conducted by the Federal Housing Finance Agency in conjunction with the Treasury Department and Housing and Urban Development Department.

At a press briefing, HUD Secretary Shaun Donovan explained that the principle of the bank fee is to ensure “that there should be a contribution from those who have contributed to this crisis to make sure that the cost of this is fully covered.” Donovan also said that “if Congress believes that there are other ways that we should look at paying for this, I think we would be open to discussions.”

Meanwhile the American Bankers Association said the refinance proposal would directly reduce lending capacity and banks’ ability to lend up to $100 billion. “Uncoordinated and ever-changing government programs…create uncertainty in the market, increase the cost of homeownership, and reduce credit availability,” ABA President and CEO Frank Keating said.