As the election approaches, President Barack Obama is increasing his push to help more Americans refinance their home loans, according to the Wall Street Journal, but recent data shows that his efforts to date have had lackluster results. Bloomberg News reported that more Federal Housing Administration-insured loans entered foreclosure in March, largely because of refinanced loans.
Half of the mortgages the agency modified in hopes of helping the borrower were in default again a year or more later. Just 84.2 percent of government-backed loans were paid on time during the fourth quarter of 2011, a full percentage point less than the previous three months.
Yet with such high demand for refinances, prospective refinance applicants face longer-than-ever delays in securing reduced payments, according to a separate report from the Journal. Though decreased interest rates have helped unlock $46 billion in first-year savings for people who refinanced their mortgages in the last three years, new applicants are worried they’ll be shut out of the savings. On average, it takes banks 70 days to complete a mortgage refinance, up from 45 days last year.
With demand so high, some banks have actually lifted the interest rates they charge in order to reduce their workloads and boost profits.
Still, Obama is pushing to further reshape the mortgage refinance market. He hopes to enact changes that make it less risky for banks to refinance loans by limiting lenders’ need to buy back loans. He also plans to let homeowners without government-insured loans to refinance into mortgages backed by the FHA. [WSJ], [Bloomberg] and [WSJ]