Mortgages

Underwater Homeowner Program in Jeopardy

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Flooding_Dreamstime_RonfromYorkJust as two major lenders finally commit to participate in a federal program to help underwater homeowners, the Republican-led House of Representatives may scrap the program entirely.

Wells Fargo and Ally, formerly GMAC Inc., announced Friday that they will participate in the Federal Housing Administration’s “Short Refi” program, according to reporting by American Banker. The program would subsidize banks that refinance mortgages for consumers whose homes are worth significantly less now than what they paid during the housing boom.

The program has languished for almost a year as the Obama administration struggled to find lenders willing to take part, as we reported here. But now top Republican leaders in the House want to kill the refinance program, along with other federal housing assistance initiatives.

“In an era of record-breaking deficits, it’s time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners,” House Financial Services Committee Chairman Spencer Bachus (R – Ala.) said in a press release.  “These programs may have been well-intentioned but they’re not working and, in reality, are making things worse.”

The committee will debate killing the program this week.

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  • http://www.credit.com Gerri Detweiler

    Your story perfectly illustrates the problem here. Lenders that have been the primary reason for the failure of these programs. Whether it’s this program or HAMP (the Home Affordable Modification Program), the failure of lenders to participate or to process applications in a timely and effective manner have kept the programs from succeeding. Instead of trying to get the lenders to clean up their act, we go after the programs.

    CRL President Mike Calhoun said it well, “When weâ��re in the midst of an epidemic, we donâ��t close all the hospitalsâ��we work faster and harder to find a cure.â�� http://tinyurl.com/4dkltp4

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