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It's today we'll federal regulators are overhauling the mortgage refinance program that's known as park the program will expand now to allow borrowers who owe more than a 125%.
Of their home's value.
To refinance Shaun Donovan is the under secretary of housing and urban development.
Joining us now welcome sir and thank you so much for being with us today.
Great to be with you well of those who out there who would use -- less than about 10% of the homes.
What will want it lifts the cap on those who are have more than 25% negative equity -- their -- so that's gonna be a critical step particularly in the hardest hit states.
Like Nevada California Arizona Florida.
But it also streamline the process dramatically.
There for other barriers that have been critical.
To stopping more people from refinancing.
We've let gone after every single one of those in partnership with the private sector to figure out fixes that will streamline the process and bring down the cost of refinancing.
To allow more people to refinance and to make it more competitive as well.
To bring in more companies that are gonna want to refinance those mortgages as well so all of those we think are very important steps.
And by the way those are steps that could help beyond just the target audience Fannie Mae and Freddie Mac borrowers who were under water.
There are six to seven million Fannie or Freddie borrowers who are actually above water that have equity in their homes but haven't refinanced yet and could benefit.
Those are steps that we want to see go even farther and help those folks as well to -- Secretary Donovan somebody's gonna take a little bit of a haircut here though because it means it.
Words the lenders are gonna be getting less money back than they have been planning to get now lot of people don't have sympathy for the banks.
But of course we -- the owners of Fannie and Freddie thanks to their nationalization.
Is second -- hurt Fannie and Freddie their bottom line.
Well actually it's gonna help Fannie and Freddie.
You've taken -- homeowner and reduced their payment to make those mortgages perform better.
-- the interest rate risk is -- actually belongs to the to the bond investors rather than to Fannie and Freddie.
In the vast majority of his -- so.
Generally speaking this will be good for the tax -- and Fannie and Freddie in the short reserve does it goes on mortgages safer right but in the short term it means Fannie Freddie will be getting less from each individual loan correct.
Actually it's bond investors Fannie and Freddie take credit risk on these loans.
They're generally not taking the interest rate risk and so.
It's it's private bond investors that are are are going to be.
Not taking that.
But but let's be clear is well out we have the support in these changes assist -- any broad range bond investors as well because they know.
First of all debt they didn't expect -- have these loans be outstanding for as long as they've been and simply because of the under water problem -- with a rate rally like we've had.
-- that expectations would certainly be that all of these loans are a large share would have refinance but but more importantly this is something that's gonna help the housing market.
It's gonna boost the amount of consumer spending -- put an average of more than 2500 dollars a year in homeowners pockets that that benefit.
And that's good for the market more broadly and that's why you've seen bond investors -- -- A broader range of private sector participants be very supportive of taking these steps.
Secretary we also have not just -- viewers but investor viewers and of course when you put in a lot of risk you expect more rewards so the question is.
If there isn't that higher interest rate what would encourage investors to get back into this market to do the investing.
As it pertains to all of these mortgages -- there.
Again let's recognize that.
These are repayable loans and it is only because there are under water that folks have not had had the ability.
To refinance and so.
I don't think it does anything to hurt the expectations.
-- on out on a future looking basis.
For investors what we're at a period where certainly the expectation would be that interest rates don't have a long way to go down.
And so you wouldn't have -- similar kind of challenge.
On rates dropping as much as we've seen going forward for those investors and more importantly.
That all of these steps that we're taking.
Are helping to -- strength in the housing market so that we will see.
Prices going up in the future and that's gonna make bond investors more confident.
They -- to know that the underlying collateral on these loans is gonna be strong going forward and this is part of a set of efforts that are gonna do that and again.
Listen to the investors themselves they've been supportive.
Of these efforts and and that I think.
It really speaks to whether this is good not just for homeowners not just for the taxpayer because it's benefiting Fannie and Freddie.
But not to investors as well Shaun Donovan as secretary of but good to see you sir thanks for coming in appreciate thank you.
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