Tucson CitizenTucson Citizen

Mortgage lifelines remain out of reach

Near-record-low mortgage rates are frustrating many homeowners who can’t refinance because home values have dropped in their neighborhood.

Thirty-year rates are down to 4.8 percent, their lowest since 1971.

President Barack Obama is encouraging everyone who can refinance now and put “$1,600 to $2,000 a year” of savings into their pockets to do so. He mentioned low rates and the government’s refinancing program in a housing roundtable late last week and in his economic speech on Tuesday.

Many U.S. homeowners are heeding the advice, or at least trying to. Refinancing applications have jumped 88 percent since February, when the federal housing plan was announced.

Mortgage giant Fannie Mae, a key participant in the government’s plan to help homeowners refinance, reports its refinancing volume climbed to $77 billion in March, twice February’s level.

To see if you can be helped, go to the government Web site, makinghomeaffordable.gov. Answer a few questions to see if you qualify under the federal housing plan to refinance through Fannie Mae or the other government-controlled mortgage giant, Freddie Mac.

The problem for too many homeowners in Arizona, California, Nevada and Florida is that home prices soared too high. Now, due to record foreclosure, home prices are falling back to pre-boom levels.

The median new home price in metro Tucson was $217,393 at the end of 2008, and John Strobeck, author of the Southern Arizona Housing Market Letter., believes it will fall to $175,000 this year.

The median resale home price plummeted from $200,000 in March 2008 to $165,000 in December, he said.

When President Obama announced his housing plan in Mesa two months ago, many homeowners were thrilled to hear about the refinancing program. Through Fannie Mae and Freddie Mac, people underwater in their mortgages – meaning they owe more on their loan than their house is currently valued – would be able to refinance.

But then the 105 percent cap was put on the program. To qualify for the plan, homeowners can owe no more than 5 percent more than their home is worth.

The program will help some homeowners. But many will be left out, even if they put 20 percent down, never tapped any equity and have been making their payments on time for several years. Many of those homeowners are frustrated and question the 105 percent limit on the program.

Last week, at a housing roundtable, President Obama said, “The main message we want to send today is that the programs that have been put in place can help responsible folks who have been making their payments, who are not looking for a handout, but this allows them to make some changes that will leave money in their pockets and leave them more secure in their homes.”

It understandably took time for lenders to figure out the federal housing plan and start working with borrowers. The loan-modification part of the housing plan, which helps homeowners who saw incomes reduced to avoid foreclosure, is even more complex. That part of the plan calls for lenders to receive $500 to $2,000 from the federal government for each loan they modify in such a way that a borrower pays no more than 31 percent of his income toward the mortgage.

Lenders began sending applications for the government-backed refinancing program to Fannie Mae and Freddie Mac last week. But at the end of last week, only about 1,000 loans had been refinanced under the program, according to the Treasury Department.

The refinancing program is supposed to help several million U.S. homeowners. Unless the 105 percent figure is scrapped for a bigger number, the program won’t help many homeowners in Tucson or the other U.S. metro areas that have seen home prices fall 30 percent in the past year.

It’s an issue that has been brought up many times to housing regulators.

President Obama did mention during the housing roundtable that more help could be coming for homeowners, and some had been hopeful it would be announced on Tuesday.

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