Refinancing changes to have little impact in N.E.

The latest Obama-administration effort to help underwater homeowners refinance their mortgages will provide modest assistance, at best, to borrowers in New England, local housing analysts predict.
The new rules, which apply to federally backed mortgages under the Home Affordable Refinance Program, will allow homeowners with mortgages owned by Fannie Mae and Freddie Mac to refinance at what are now historically low interest rates, even if they owe more on their homes than those homes are worth. The new rules go into effect Dec. 1.
Current rules prevent refinances for homes in which the amount owed is 125 percent or more of the current value and the Federal Housing Finance Agency estimates that the new rules could double the number of homeowners who take advantage of the refinancing program.
But, thanks to the nature of the housing bubble, the majority of homeowners deeply underwater on their mortgages are in the South and West, in states like Nevada and Florida, where construction and subprime lending ran wild before the recession.
“This isn’t going to have a large impact in the Northeast,” said Stephen Tetzner, vice president of Homestar Mortgage, Inc., in Providence, and president of the Mortgage Bankers Association of Rhode Island. “Most of the people in this area who were able to refinance have already done it. The people this is going to benefit are in the South and West.”
Helen Iasimone, homeownership-connection director for the Housing Network of Rhode Island, said the changes were welcome, but will not be a panacea for Rhode Island homeowners.
“It is another tool available, but it may not have a large impact,” Iasimone said.
Introduced in 2009, HARP refinancing is open only to borrowers whose mortgages are owned by the government-backed mortgage lenders Fannie Mae and Freddie Mac and were originated before May 31, 2009. Borrowers can only refinance their loans once under the program, even if interest rates have fallen significantly since. Homeowners must also be current on their mortgage to refinance under the program and cannot have missed a payment in the last six months.
Tetzner said if the government had really wanted to expand the number of people who could be helped by HARP, it could have dropped the May 2009 cutoff date.
Since the housing market has failed to rebound since early 2009, there are many post-cutoff -date borrowers whose mortgages have since fallen underwater.
“What would really spur the market is just open up the HARP 2009 deadline and say everyone can take advantage,” Tetzner said. “There are also a lot of people who refinanced when rates were around 5 percent and you don’t get another bite at the apple.”
This fall interest rates for mortgages hit 4 percent.
CoreLogic, the California-based real estate tracking firm, predicts that the new HARP rules will help a significant number of homeowners in the areas hardest hit by the housing crisis, but will not have a substantial impact on the overall housing market.
“Time will reveal the true impacts of HARP 2.0, but it is certain that many more borrowers will benefit than would have otherwise,” Mark Fleming, chief economist for CoreLogic, said in a statement. “The impacts will be targeted to housing markets and local economies that are the hardest hit by the housing collapse, as these are the markets with the largest shares of insufficient and negative-equity borrowers.” Fleming added that the program should be a positive for Fannie Mae and Freddie Mac, because it should reduce the risk of defaults, and provide a boost for mortgage originators who will see an additional 2 million new transactions.
Across the country, CoreLogic estimates that 20 million homeowners are underwater and 4.7 million are underwater by 25 percent or more.
In addition to lifting the eligibility rules for underwater borrowers, the new rules will also eliminate “risk-based” fees for borrowers who agree to shorten the term of their mortgage when they refinance.
The rules also eliminate the need for new property appraisals for a refinancing to go through.
U.S. Rep. Barney Frank, D-Mass., who has been deeply involved in housing and issues surrounding Fannie Mae and Freddie Mac, said the new rules are positive, but do not address the fundamentals of the foreclosure crisis.
“It will be helpful, but does not go as far as I would like,” Frank said. “There is a problem with people underwater and what they did with the refinancing is helpful as far as it goes, but there are limits.”
At Pro-Home, Inc, a nonprofit, affordable-housing advocate in Taunton, housing counselor Tony Demaral said he hoped the new program would help some people, but doesn’t think it addresses the core problem of banks or mortgage investors refusing to refinance loans for homeowners who have fallen behind or don’t meet any number of criteria.
“What we felt was going to be a really good program doesn’t have much teeth,” Demaral said.
“When push comes to shove, the [mortgage holders] don’t have to do it. They have a lot of outs. Being underwater used to be one of them, but there is also credit score and unemployment.” &#8226