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Why Obama's refinance plan is still missing the point

This is a cross post from www.dailypolitique.com.

Yesterday, President Obama announced that he used an executive order to revamp the rules for the Home Affordable Refinance Program. The hope is to make it easier for struggling homeowners to refinance their mortgage and take advantage of historic low interest rates.  The new rules include allowing homeowners who owe more than 125% of the value of their home to refinance their homes as long as they are current on their mortgage. The process is also supposed to be streamlined and eliminating some of the fees. White House officials estimate these new changes will help 1 million homeowners (14 million are underwater) get some relief.

Forgive me if I sound skeptical.  The last time the administration announced a refinance plan, they estimated 5 million people would be helped. So far, less than one millionhave been through the program. Once again there is a lack of standing up to the banks.  The only loans that qualify for the program are those held by Fannie and Freddie.  The reason why the initial version of this plan and other plans to confront the crisis have failed, is because they lack any real pressure on the banks.

I am sure a decent number of homeowners will get relief from this move, but the impact on the crisis will be minimal.  These loans are not the ones hurting the housing market, since they aren't sitting empty or for sale.  These are homeowners who while underwater are still current on their mortgage and not in danger of facing foreclosure.  The administration has said this will be the first in a series of moves, but once again I will not be holding my breath.

Until the President and Congress are willing to stand up to the banks, hold banks accountable, and force them to  help fix the crisis, any program will have minimal impact.  We can't continue to use a spray bottle on a wild fire when it comes to finding solutions.  Until someone is willing to stand up to the banks that is all we will be doing.