Six Ways to Boost Refinancing to Slow the Rate of Florida Foreclosure
Wed Sep 14, 2011 on Blog
Florida remains in the number two spot for the United States with highest rate of foreclosed homes. Despite the fact that mortgage rates are the lowest they have ever been, currently 4.12%, people are not taking advantage to refinance their homes. In spite of a government program called Home Affordable Refinance Program (HARP) that was specifically designed to help underwater homeowners refinance their homes and ideally offsetting the need for foreclosure defense, little is helping.
The Wall Street Journal reports six ways the government can do to help reduce the Florida foreclosure rate.
1. Open eligibility. Currently, only people who obtained loans prior to 2009 and have not already refinanced through HARP are eligible.
2. Remove the 125% loan to value cap. This cap causes approximately 1 in 13 homes to be ineligible for the program.
3. Get rid of the extra fees Fannie Mae and Freddie Mac charge high risk borrowers. These fees reduce the incentive for borrowers to use HARP.
4. Reduce closing costs by streamlining the application process.
5. Find a way to get homes with second mortgages and mortgage insurance auto approved for the program.
6. Find a way to alleviate banks’ fears of “put-backs”.
While these changes could significantly boost housing refinance and slow down Florida foreclosures so people can hang onto their Florida real estate, it would come at the expense of a smaller economic boost as bondholders would take a hit. However, mass refinance programs like some are proposing would hurt the economy even more by introducing a measure of uncertainty that is anathema to potential investors. Even implementing just two of the above ideas could produce a happy medium that benefits the country as a whole.
“Without a bold refi plan for underwater homeowners, businesses will not have any demand for products. By allowing homeowners in financial distress to refinance their home mortgages at the prevailing low interest rates, this will put cash back in their pockets by saving them billions of dollars in annual mortgage payments — money that can be spent buying goods and services,” said Roy Oppenheim, Oppenheim Law foreclosure defense attorney and legal blogger. “Jobs will not help without new consumer demand.”