President Obama tried to upstage the Super Tuesday primaries with housing announcements, including a plan to help military personnel who lose their homes through improper foreclosures.
Obama also put forward an idea for reducing refinancing costs for borrowers with government loans. The administration has turned up its rhetoric and sought more aggressive action in recent months in an effort to lower mortgage costs and hold the financial industry accountable.
“We are going to do this on our own. We don’t need congressional authorization to do it," the president told a news conference. "It is unconscionable that members of our armed forces and their families have been some of those most susceptible to losing their homes through the actions of unscrupulous banks and housing lenders."
Obama’s announcements include new details about a recently agreed $25 billion mortgage servicing settlement with the top five lenders that includes a special review through the Justice Department of “every servicemember foreclosed upon since 2006,” according to a White House fact sheet.
Under the Servicemembers Civil Relief Act, lenders cannot foreclose on active-duty military members and their families or charge them interest rates of more than 6 percent on preexisting debt. Some of the biggest lenders have already tried to rectify some of their violations of this law, but the administration’s announcement attempts to guarantee review and relief.
The review process would “provide any who were wrongly foreclosed upon with compensation equal to a minimum of lost equity, plus interest and $116,785,” paid for by the settlement, and provide additional protections and compensation for other abuses related to handling mortgages of military members, the White House document said.
The Obama administration has recently made several administrative changes to enhance existing housing programs, developed a new mortgage fraud working group, and called for legislation to streamline more refinancing. Although the administration’s track record on housing has been sharply criticized as underwhelming, the White House is hoping it can highlight the issue to distinguish Obama from any Republican challengers. The sluggish housing sector continues to hamper economic recovery and more than 11 million homeowners owe more than their homes are worth.
The other housing announcement has to do with an effort to encourage borrowers to refinance into lower interest rates. The administration is making changes to lower refinancing costs for borrowers with loans backed by the Federal Housing Administration—a government mortgage insurance program that offers low-down-payment mortgages targeted to first-time and low- and moderate-income borrowers.
The White House said it is reducing up-front mortgage insurance premiums and annual fees for borrowers with FHA loans so that roughly 2 million to 3 million borrowers could save an average about $1,000 per year, in addition to the savings from refinancing.
"There are real things we can do right now to make differences in the lives of innocent, responsible homeowners," Obama said.
“If you’ve acted responsibly, you should have a chance to save that money on your home." The White House fact sheet said the plan would save homeowners an average of $1,000 a year.
Analysts said they did not have enough details to fully gauge how big an impact the initiatives could make on the market, but said they expected there would be positive, if modest, additional measures for homeowners.