President Obama tries to sell America on mortgage refinancing

Nearly two months after first announcing his plan to stem foreclosures and rescue the housing market, President Barack Obama convened a "Housing Refinance Roundtable" at the White House to talk about the mortgage meltdown.

In a brief public statement, the president said the nation's economic crisis could partially be blamed on the housing market "because in some areas housing values got way overheated, in some cases you had a lack of regulation."

But, Obama added:

Here's the good news.  At the beginning of this administration we said we are -- we were going to tackle directly the problems that homeowners were experiencing and figure out ways in which we could provide them assistance in reducing their interest rates, modifying their loans so that they would be in a position to stay in their homes and reduce their monthly payments.  And around the table here you see some wonderful families who have taken advantage of what are now historically low mortgage rates, brought about in part by some extraordinary actions by the Federal Reserve, but also brought about by the housing plan that [Treasury Secretary] Tim Geithner and [Housing and Urban Development Secretary]Shaun Donovan helped to design.

The housing market, however, is still in a crisis. As the Consumer Reports Home & Garden Blog has written, about 7 percent of U.S. homeowners were at least 30 days late on their mortgage payments in February. That's a 50 percent jump from a year ago. The percentage of delinquent mortgages for people with subprime loans is significantly higher—almost 40 percent were at least 30 days behind on their loans in February.

Forty-five percent of existing home sales in February involved distressed-sale properties, including short sales and REOs (real-estate-owned properties).

President Obama advised homeowners to look into refinancing their mortgages to stay out of trouble or just to save a little money:

And what we want to do is to send a message that if you are having problems with your mortgage, and even if you're not and you just want to save some money, you can go to MakingHomeAffordable.gov -- MakingHomeAffordable.gov -- and the way the web site is designed, you can plug in your information and immediately find out whether or not you are potentially eligible for one of these -- one of these mortgage refinancings.

To back up the president's call for refinancing, the White House released some statistics about the housing market since the president made his initial rescue plan announcement:

• Rates on 30-year mortgages have dropped to an all-time low of 4.78 percent.
• Refinancing applications are up 88 percent (Mortgage Banker’s Association).
• Fannie Mae refinanced $77 billion of mortgages in March, nearly twice the February amount, and their highest volume in one month since 2003.
• Over 500,000 borrowers have accessed Fannie Mae online to learn about refinancing and Fannie Mae is now processing applications to complete refinancing for eligible borrowers.

The president also brought up the growing danger of fraud.

"As people have become aware that the government is helping to promote refinancing, we're starting to see some scam artists out there who are contacting people saying, 'you can refinance your home, the government has got a program, we're ready to help -- oh, but by the way, first you've got to pay some money,'" Obama said. "I just want everybody who is watching today to know that if somebody is asking you for money up front before they help you with your refinancing, it's probably a scam."

That's just one of the tips to avoid a foreclosure fiasco which Consumer Reports offered in our March issue. Read the rest of our advice on how to avoid refinancing scams here.

Lessons from one family's encounter with a forclosure rescue scam

While the government announced yesterday that it is cracking down on mortgage and foreclosure fraud, Consumer Reports tackled to the problem in the March issue and gave some advice on how to protect yourself and your home.

In the video on the right, meet Kari and Roger Mizer, first-time homeowners who faced foreclosure on their home in 2007 after the monthly payment on their adjustable-rate mortgage hit $1,850.

The Mizers found hope when they received a letter from a mortgage-restructuring firm that claimed to have a 95.5 percent success rate in stopping foreclosures, but it turned out to be a scam. (Read more of the Mizer's story here.)

To keep from getting into a similar situation yourself, Consumer Reports advises you to avoid some common traps:

• Watch out for unsolicited offers
• Be wary of demands for up front fees
• Stay away from any service that advises you to stop contact with your lender
• Stay away from any service that asks you to transfer title of your home

Here's what you should do to deal with the threat of foreclosure:

Anyone anticipating problems making mortgage payments should seek legitimate free or low-cost help as soon as possible. Contact a housing counseling agency certified by the Department of Housing and Urban Development (www.hud.gov/foreclosure or 800-569- 4287). Their agents can assess options and advise you in negotiating with the lender. Advice is also available at the Homeowner's Hope Hotline, at 888-995-4673 (see box below). Another good source of help is the Institute for Foreclosure Legal Assistance, www.foreclosurelegalassistance.org, which funds and trains groups nationwide that give subsidized legal representation to families facing foreclosure.

Government cracking down on mortgage fraud

The government today announced a crackdown on mortgage modification come-ons that have flourished in the ongoing housing crisis. Typically, companies with official-sounding names prey on homeowners in danger of default who are seeking to refinance.

"These predatory scams callously rob Americans of their savings and potentially their homes," Treasury Secretary Timothy Geithner said Monday, according to the Associated Press.  "We will shut down fraudulent companies more quickly than before. We will target companies that otherwise would have gone unnoticed under the radar."

Attorney General Eric Holder said the FBI is investigating about 2,100 cases of mortgage fraud. The Federal Trade Commission has sent warning letters to 71 companies it says were running suspicious advertisements and has filed five new civil cases to halt illegal loan modification scams.

Consumer Reports reported on these financial traps in the March issue. Read about five common come-ons and see our video report on the "Faces of foreclosure."

Obama goes online to talk about the economy

President Barack Obama hosted an online town hall meeting today from the White House.

The president answered 12 questions in a little more than an hour--six were from the web site and six were from the audience. About 3.5 million people voted on which questions should be asked, the president said.

The White House said that 104,081 questions were submitted by 92,933 people and that about 67,000 people watched on WhiteHouse.gov, in addition to those who watched on television. 

The general topic was the struggling economy, but the questions ranged from the job market to small business loans to what the government is doing about the auto industry.

The president did answer one question which wasn't officially asked, but was one of the most popular topics in the voting on WhiteHouse.gov.

"I have to say that there was one question that was voted on that ranked fairly high and that was whether legalizing marijuana would improve the economy and job creation," Obama said with a chuckle. "And I don't know what this says about the online audience, but I just want--I don't want people to think that--this was a fairly popular question; we want to make sure that it was answered. The answer is, no, I don't think that is a good strategy ... to grow our economy."

New home Sales climb in February

Sales of new one-family homes were 4.7 percent higher in February than in January, according to new figures from the Commerce Department, providing the second report this week of better news for the troubled housing market.

The seasonally adjusted sales rate for new homes was 337,000 in February, according to the government. While that's better than last month, it is still way below the rate of 572,000 reported a year ago.

The price of homes is still falling, however. The median sales price of new houses sold in February was $200,900, down from 206,800 in in January.

On Monday, an industry group reported that the number of existing-home sales climbed in February as well.

Administration set to announce regulatory reform and recovery proposals

The Administration tomorrow will announce a long awaited plan to help banks grapple with the financial crisis, along with a regulatory reform proposal that would grant the government broad new powers to protect the economy against financial shocks.

The Administration is preparing to spend up to $1 trillion to lift the toxic assets at the heart of the financial crisis from banks' balance sheets. The government plan would create a new entity called the Public-Private Investment Program to held distribute the risk between taxpayers and private investors.

Under the plan, the government would offer billions in low-interest loans to help the private sector purchase toxic assets. Using money from the $700 bank bailout fund, the government would match private investments dollar for dollar and share in both the losses and the potential profits.

The Treasury would also expand its recently-launched $1 trillion Term Asset-Backed Securities Loan Facility to help sweep up toxic assets. The TALF is currently setup to guarantee the loans behind securities backed by consumer debt such as auto loans, student loans, and credit card debt.

The FDIC would also be called upon to share their expertise in managing the toxic assets retrieved from failed banks.

“We’re going to move quickly to lay out a new financing program to deal with these legacy assets,” Treasury Secretary Timoth Geithner told Bloomberg News. “We have and expect to see a lot of support for this program.”

Under the proposed regulatory framework, the Treasury Secretary, with the permission of the President and the Federal Reserve, would be empowered to place into government conservatorship ailing institutions whose collapse could threaten the financial system.

The Treasury Secretary would then be permitted to dissolve contracts and limit payments to creditors. These powers would largely prevent a recurrence of the bonus debacle currently plaguing A.I.G.

The Public-Private Investment Program will be announced tomorrow, with an announcement concerning the new regulatory framework coming by Tuesday.

Fannie and Freddie bonuses in the crosshairs

Fannie Mae and Freddie Mac, the mortgage giants taken over and bailed out by the federal government, appear to be next on Washington's target list of failing companies which have given out executive bonuses.

Rep. Barney Frank, the House Financial Services Committee chairman, sent a letter to the director of the Federal Housing Finance Agency, which oversees the groups, asking him to cancel bonuses at Fannie and Freddie.

"I am writing to urge strongly that you rescind the retention bonus programs at Fannie Mae and Freddie Mac, prohibit any further payment of bonuses to executives under that program, and pursue repayment of any already-paid bonuses," Frank wrote. "The public, having provided significant support for the purpose of restoring trust and confidence in our country’s financial system, rightfully insists that large bonuses such as these awarded by institutions receiving public funds at a time of a serious economic downturn cannot continue."

It was revealed that top executives at Fannie Mae would likely get bonuses in excess of $1 million as part of an employee retention program. The same is expected of Freddie Mac, but details are not public yet.

Fannie and Freddie own or back about half of the nation's mortgages. Both groups have asked for billions in federal money to prevent their collapse.

Fannie Mae's chief executive wrote a memo to employees this morning saying that eliminating the bonuses could jeopardize the rebuilding of the housing market.

"I am deeply concerned that eliminating our retention plan would jeopardize our ability to fulfill the mission the Government has given us to address the housing crisis, including the Administration's Homeowner Affordability and Stability Plan that so many of you have been working nights and weekends to carry out," Herbert Allison wrote, according to the Washington Post. "Your experience and expertise make you highly competitive in the job market, especially as so many other companies need your talents to work through this crisis."

Frank, in his letter, tried to head off that line of argument.

"I remain very skeptical that retaining and rewarding people who made the mistakes that contributed to the unsatisfactory performance is a good idea," Frank wrote. "Further, in this troubled economy, and in this job market, it is difficult to imagine that the companies would not be able to find competent and talented replacements for anyone who chooses to leave."

MakingHomeAffordable.gov launches to explain housing rescue plan

President Barack Obama says his housing bailout will help up to 9 million Americans stay in their homes during these troubled economic times. Today, his government launched MakingHomeAffordable.gov to give people more information on the plan.

The site has questionnaires that aim to help home owners determine if they are eligible for Home Affordable Refinancing or Home Affordable Modification. There is also a 12-page question and answer document (PDF).

MakingHomeAffordable.gov also gives this alert to consumers: Beware of Foreclosure Rescue Scams - Help Is Free!!

Record percentage of mortgages are troubled

At the end of 2008, a greater percentage of Americans were late on their mortgage payments or in foreclosure than at any time since 1972, according to an industry study released today.

Almost 8 percent of all outstanding loans were delinquent in the fourth quarter of 2008, the Mortgage Bankers of America said. That's the highest rate ever in the National Delinquency Survey, which began in 37 years ago.

Adding foreclosure on top of delinquent payments, 11.18 percent of all mortgages were in trouble, the survey found.

"The percentage of loans 90 days or more past due jumped sharply in the fourth quarter. Normally servicers would have initiated foreclosure actions on a significant portion of these loans but delayed doing so for a variety of reasons, including working on loan modifications, complying with the guidelines of different investors, and various delays in different locales," said Jay Brinkmann, MBA’s chief economist for the Mortgage Bankers of America.

"In addition, some servicers report a spate of borrowers running their accounts 90 days delinquent in order to qualify for certain modifications."

"While California, Florida, Nevada, Arizona and Michigan continue to dominate the delinquency numbers, some of the sharpest increases we saw last quarter in loans 90 days or more delinquent were in Louisiana, New York, Georgia, Texas and Mississippi, signs of the spreading impact of the recession," Brinkmann said in a statement.

Consumer's Union, the publisher of Consumer Reports, has been chronicling the human faces of the mortgage meltdown. Visit DefendYourDollars.org to see more videos and click here to share your story.

Government details mortgage rescue plan

The Obama administration has released guidelines for its mortgage rescue plan, setting out rules for the distribution of $75 billion to an estimated 4 million at-risk homeowners (in addition to another 5 million who may be permitted to refinance their loans).

The Treasury Department's statement said that the government will work with loan companies to get homeowners' mortgage payments down to 31 percent of their incomes.

The first part is up to the lenders:

The lender will have to first reduce monthly payments on mortgages to a specified affordability level (specifically, the lender must bring down monthly payments so that the borrower’s monthly mortgage payment is no greater than 38% of his or her income).

The second part is where the government steps in:

Next, the program will match further reductions in monthly payments dollar-for-dollar, from 38% down to 31% debt-to-income ratio for the borrower.

Those payment levels will be locked in for five years, according to the Treasury Department's Fact Sheet (PDF).

Despite some opposition, the White House's mortgage bailout appears to have a broad base of support.

In a new NBC News/Wall Street Journal poll, 56 percent said they thought the proposal was a good idea and 27 percent said it was a bad idea.

That same poll, however, found that many thought bailing out homeowners was unfair because it rewarded people who have not been fiscally responsible.

Forty-eight percent said that it was unfair, according to the poll, whole 36 percent said the "condition seems fair and provides assistance to people who have been caught up by the worst conditions in the past fifty years."