In outlining his jobs plan before a joint session of Congress last night, President Obama broadly signaled his intent to help more American homeowners refinance their mortgages.
Obama said his administration will work with federal housing agencies to loosen refinance terms and enable more people to refinance at interest rates that are currently hovering around 4%.
"I know you guys must be for this, because that's a step that can put more than $2,000 a year in a family's pocket and give a lift to an economy still burdened by the drop in housing prices," Obama said.
White House officials are negotiating with Fannie Mae, Freddie Mac and their conservator, the Federal Housing Finance Agency, on ways to ease refinancing rules, Reuters reports, citing unnamed White House officials. One official said the administration hopes to ‘have progress in that area’ over the next several weeks, Reuters reports.
The White House's $447 billion jobs package, the American Jobs Act, also calls for tax breaks for companies that hire new workers and payroll tax cuts for working Americans and small businesses.
Ahead of Obama's address, the nonpartisan Congressional Budget Office (CBO) released an analysis showing that a program that would broaden the refinance pool by 2.9 million borrowers would result in 111,000 fewer defaults. The downside, according to the CBO's unofficial estimates, is that such a plan would cause federal mortgage-backed securities investors to suffer fair-value losses of about $4.5 billion and non-federal investors to lose between $13 billion and $15 billion.