The Obama administration is weighing whether to allow homeowners to refinance their mortgages so they can take advantage of the current rock-bottom rates, as the foreclosure epidemic spreads.
Sources in the housing and mortgage industry confirm that the refinancing proposal, which would cover government-backed mortgages, is one of several on the table as the administration tries to tackle the housing slump as well as the overall slack in the economy.
"As one would expect, we continue to look for ways to ease the burden on struggling homeowners and to help stabilize the market, whether that's through assessing new proposals or older ones worth re-considering as market conditions change," an administration official told Fox Business Network, while cautioning they have "no plans to announce any major new initiatives at this time."
The refinancing idea would help homeowners by saving them money on interest payments while potentially having a stimulus effect on the economy -- since the money they would have spent on mortgage interest would be available for other things.
Christopher Mayer, a professor of real estate finance and economics at Columbia University who pushed the idea, estimated it could save consumers $75 billion a year in interest.
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The refinancing idea drew some early criticism Thursday from Americans for Limited Government, which claimed the move would only encourage the pattern of reckless borrowing that triggered the housing bubble in the first place.
"The whole reason the crisis began was because cheap loans were provided to those with poor credit. Now, the Obama administration wants to return to this failed policy to prop up his sagging re-election prospects by directing the money to favored constituencies that took out loans which could not be repaid," ALG President Bill Wilson said in a statement. "This is nothing more than an $85 billion Obama-Re-elect slush fund."
