President Obama said in his State of the Union address Tuesday that he will submit to Congress a plan that gives responsible homeowners the chance to refinance and save roughly $3,000 a year on their mortgage.
“No more red tape,” he said. “No more runaround from the banks.”
The legislation, he said, would be funded by a small fee charged to the largest banks. It will expand on the already widened Home Affordable Refinance Program. The Federal Housing Finance Agency eliminated barriers in November for Fannie Mae and Freddie Mac borrowers to refinance into historically low interest rates.
Nearly 11 million borrowers in the U.S. are underwater, roughly 22.5% of all outstanding loans, according to CoreLogic (CLGX). Another 2.4 million hold less than 5% equity in their homes.
In addition to the new assistance, Obama directed the U.S. Attorney General and leading state AGs to expand their investigations into mortgage fraud and other abusive practices that led to the housing crisis.
“This new unit,” he said, “will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.”
In 2010, a multistate coalition of AGs, the Justice Department and federal agencies launched an investigation into apparent foreclosure mispractices at the major banks. More than one year later, a settlement draws near. But Obama said Tuesday the investigation will now span across lending and securitization issues.
New York AG Eric Schneiderman will head up the task force, his office said in a statement. Schneiderman was previously removed from the servicing negotiations because he wanted to shift the talks to securitization and other problems at major Wall Street firms.
“Some financial firms violate major anti-fraud laws because there’s no real penalty for being a repeat offender,” Obama said. “That’s bad for consumers, and it’s bad for the vast majority of bankers and financial service professionals who do the right thing.”
Write to Jon Prior.
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