Nov 14, 2011
Late last month President Obama assured homeowners facing foreclosure that he understood the problem. Speaking in Nevada, where the foreclosure rate is the highest in the country, Obama said, “Probably the single greatest cause of the financial crisis and this brutal recession has been the housing bubble that burst four years ago. Since then average home prices have fallen by nearly 17%... Now this is a painful burden for middle-class families. And it’s also a drag on our economy.”
Obama announced he had a plan to address the crisis, saying his plan,“is going to help a lot more homeowners refinance at lower rates, which means consumers save money, ... it gets those families spending again. And it also makes it easier for them to make their mortgage payments, so that they don’t lose their home and bring down home values in the neighborhood.”
In fact, Obama’s plan will help very few homeowners. The only borrowers eligible for Obama’s mortgage refinancing plan are those whose loans are owned by Fannie Mae or Freddie Mac and have been since at least May 31, 2009, who have less than 20% equity in their homes, who have not missed a payment in the last six months and haven’t had more than one late payment in the past year.
That’s only about 1.5 to 2 million out of 14.5 million people whose homes are underwater, according to the New York Times. The plan does nothing to reduce what these few people owe, it simply allows more of them to refinance into loans with lower interest rates.
Once again, Obama’s plan has more style than substance. He hopes voters won’t look closely enough to realize that.