Many in Mass. may get mortgage help Obama program revamps lending

Jenifer B. McKim Globe Staff

More than 100,000 Massachusetts homeowners who cannot refinance at current low rates because of falling property values may now be able to do so as part of the Obama administration's housing plan.

The administration yesterday released new details about its $75 billion plan to help some 9 million homeowners. The plan has two main components to help homeowners trapped in two different circumstances: those struggling to pay the monthly mortgage and at risk of foreclosure; and those locked out of refinancing because of lower property values.

The refinancing plan will allow eligible borrowers with loans held by government-sponsored mortgage companies Fannie Mae and Freddie Mac to obtain a new mortgage at currently lower rates, regardless of how little equity they've built up in their homes. Even those who are a little underwater - that is, the value of a home is less than what is owed on the mortgage - may be able to refinance.

"There are a growing number of people in Massachusetts who were prudent borrowers but their homes have simply plunged in value. If they have any loss of income they are really at risk of a foreclosure," said David Abromowitz, a senior fellow at the Center for American Progress in Washington and a partner at the Boston law firm Goulston & Storrs. "The plan is a broad, serious attempt to stop the tidal wave of foreclosures that drags down everybody's home prices."

The refinancing mechanism aims to help as many as 5 million borrowers in owner-occupied homes who are current on their mortgage payments, but have less than 20 percent equity because of declining property values. These borrowers have not been able to take advantage of extremely low interest rates because mortgage lenders often refuse to loan more than 80 percent of the value of the home.

The Obama plan would extend the refinancing help to borrowers who are underwater, so long as the value of their homes has dropped no more than 5 percent below what they owe on their loans.

Some quarter of a million borrowers in Massachusetts fit the federal profile of having not enough equity in their homes to refinance, according to real estate tracker Warren Group, and about half of them have loans held or guaranteed by Fannie or Freddie. More than 8.3 million US mortgages, or 20 percent of all mortgaged properties, are underwater, according to report released yesterday by First American CoreLogic.

Both mortgage companies have set up contact points for borrowers to determine if their loans are owned or guaranteed by them. For Fannie Mae, borrowers can call 1-800-7FANNIE or go online to www.fanniemae/homeaffordable. For Freddie Mac, call 1-800-FREDDIE or go online at www.freddiemac/avoidforeclosure.

But mortgage lenders and borrowers yesterday said they still had questions. Chris Shedd, president of Mortgage Resources Inc. in Wellesley, said the plan could be a boon for the disappointed customers he's had to turn away because their dropping home values made them unable to refinance.

"I hope it is going to be all these things," Shedd said. "Now I can call (my customer) back and say you can do it now and you've got it."

AnnLouise White of Dedham, who is hoping she can refinance under the program, said she was resisting calling her mortgage lender immediately, to first digest the details of the plan. White bought her house in 2007 for $415,000 and but hasn't been able to refinance because her home has since dropped in value.

"I'm still hoping," White said. "I'm trying not to jump the gun."

The Obama administration said the refinancing plan is not expected to cost taxpayers any money. The $75 billion in the housing plan would go toward tackling the thorny problem of foreclosures by subsidizing lower-cost mortgages for borrowers who are at risk of losing their homes. Even those borrowers who haven't missed a mortgage payment may be eligible for this help, if they have high debt levels, for example, on the grounds that modifying their loans now would avoid an eventual foreclosure.

The government will pay loan-servicing agencies to change the terms of these mortgages to make them more affordable based on the borrower's income. Servicers can either lower the interest rate to as low as 2 percent, extend the life of the loan, or if necessary postpone repayment of some of the principal to bring monthly payments down.

Loan servicers would be paid $1,000 for successfully modifying a loan of a delinquent borrower, and $1,500 if the borrower is current on the loan. The service will get $1,000 for each year the borrower is able to keep paying the loan, up to three years.

Borrowers, meanwhile, would receive $1,000 from the government a year toward lowering their principal, up to five years.

Eligible borrowers must be owner-occupants whose unpaid principal is no more than $729,750 for a single-family home. They must show the current mortgage payment is no longer affordable because of a significant change in income or expenses.

Lenders that receive government assistance under the administration's

Financial Stability Plan are required to modify loans of qualified borrowers. Already many of the nation's biggest banks, including Citigroup, Bank of America, JPMorgan Chase, and Wells Fargo, have said they will participate in the program, government officials said. John A. Courson, president of the Mortgage Bankers Association, said the plan will "undoubtedly help servicers keep more at-risk borrowers in their homes."

Separately, however, Courson wished the refinancing part would have included more borrowers whose loans were even further underwater. Sharon Price, director of policy for the National Housing Conference, said she believed the administration was being realistic about who it could best help.

"It will help people who are a little underwater but not truly underwater," Price said. "Clearly they are trying to reach the broadest population under both of these plans. But they are not reaching people who may be past the point of no return."



Source

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