Obama Reveals Proposals for Housing Finance Reform

Obama Reveals Proposals for Housing Finance Reform

08/06/2013BY: ESTHER CHO

In a speech Tuesday, President Barack Obama will stress the need for a new housing finance system based on specific core principles that include putting private capital first, ending Fannie Mae and Freddie Mac’s “failed business model,” and ensuring broad access to the 30-year fixed rate mortgage, according to a fact sheet from the White House.

“Fannie Mae and Freddie Mac should be wound down through a responsible transition, and the government role during normal times should be no bigger than necessary to achieve the principles laid out here,” officials stated in the fact sheet released prior to the speaking event in Phoenix.

The call to wind down the GSEs reflects separate housing finance reform bills recently introduced by members of the Senate Committee on Banking and the House Committee on Financial Services. However, the bill from the House would provide for a non-government nonprofit to replace the GSEs rather than a government agency.

To help responsible homeowners refinance, the president also backs three proposals, which are to streamline refinancing for borrowers with government-insured mortgages, waive closing costs for borrowers who refinance into shorter terms, and expand eligibility for refinancing for those without government-backed mortgage by creating special programs, according to the fact sheet.

The administration estimates families will save about $3,000 a year through refinancing while mortgage rates are low.

Obama will also show support for greater clarity on lending rules to help responsible and qualified families obtain mortgages.

According to the fact sheet, many borrowers “are denied a loan because lenders are unclear of the rules of the road for lending and are protecting themselves by only lending to those with the most pristine credit.”

Obama will also address the need to fix the “broken” immigration system in order to increase home values.

The fact sheet stated that between 2000 and 2010, immigrants accounted for almost 40 percent of new homeowners nationwide, and account for over 80 percent of the growth in homeowners in California.

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