President Obama and White House officials announced a major change to a national home-refinancing plan Monday, in an effort to stimulate the economy and rescue as many as one million homeowners from foreclosure.
The proposal, an update to the Home Affordable Refinancing Program, is the latest in a long series of White House efforts to rehabilitate the housing market, which has been struggling to shake off its torpor since before Obama took office. The near-motionlessness of the country's economy is believed to stem at least in part from the housing sector, where prices still haven't recovered from their implosion of a few years ago, and millions of homeowners are trying to cope with the sudden evaporation of their wealth.
During an appearance in Las Vegas -- which has the worst foreclosure rate in the country -- the president described a new version of HARP that calls for revising the refinancing standards for homeowners with federally-guaranteed loans.
"There are still millions of Americans who have worked hard and acted responsibly, paying their mortgage payments on time," Obama said. "But now that their homes are worth less than they owe on their mortgage, they can’t get refinancing. That will soon change."
As many as one million homeowners might be eligible for refinancing under the new rules, according to the Wall Street Journal. The revisions will lower some transaction costs and fees, and make it easier for homeowners who are underwater -- who owe more on their mortgages than what their properties are worth -- to refinance their mortgages at a lower rate.
In theory, easier refinancing will help homeowners stay in their homes and put more cash in their pockets, allowing them to spend money elsewhere and create some forward motion in an economy that has barely expanded at all in 2011.
But critics are skeptical that the initiative will have much effect on the housing sector's more systemic problems, which include a nationwide rash of foreclosed and vacant properties, and deeply depressed prices that some analysts do not expect to begin rising again for years.
A recent article in The Washington Post describes how previous efforts on the part of the Obama administration to pull the housing industry out of its tailspin resulted in the initial incarnation of HARP, introduced in 2009.
That program, along with other attempts made by the administration to assist homeowners at risk of foreclosure, was only a partial success, helping out some 1.7 million of the 9 million people the White House had originally targeted, according to WaPo.
And the Congressional Budget Office has suggested that the new revisions to HARP will also have only a modest effect on the market, saying that it's an inadequate fix given the scope of the housing problem.
Analysts have similarly expressed lukewarm enthusiasm for the administration's plan to restore hundreds of thousands of vacant and foreclosed properties around the country, saying its positive effects will be negligible unless a greater turnaround occurs in the housing industry.
When such a turnaround might happen is anyone's guess, although most estimates don't expect it any time soon. With millions of foreclosures still underway in a backlogged system, the market might take as long as three years to get back on track, according to research conducted by the real-estate sites Trulia and RealtyTrac earlier this year.
Update: This post has been revised to include the president's remarks.