Although he would appear to be a good candidate, Mr. Compton, 57, has been turned down twice for a federal refinancing program aimed at homeowners like him.
Still, he has renewed hope. That’s because the government is expanding the Home Affordable Refinance Program, which was meant to help homeowners whose mortgages are backed by the government and whose home values have declined sharply, even below what the borrowers owe. Mr. Compton is one of those underwater homeowners.
When the Treasury Department announced the program, referred to as HARP, two years ago, it said it could help four million to five million homeowners whose home values had plunged. Yet just 900,000 borrowers — whose loans are owned by Fannie Mae and Freddie Mac, the government-sponsored housing finance companies — have successfully refinanced through the program. Starting early next month, though, banks will begin using new criteria intended to make more borrowers eligible: raising the ceiling on how much owners can borrow over the value of their home as well as relaxing rules that might force banks to take back bad loans from the government. In announcing the change, the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, carefully eased expectations, suggesting about 900,000 more homeowners would be helped, roughly doubling the size of the program to date.
Analysts welcomed the change, but some criticized it for still not capturing nearly enough of the people who could benefit from lower interest rates.
Of the 22 million borrowers who could be eligible for the government refinancing program, nearly 70 percent of them are paying interest rates of 5 percent or more, according to CoreLogic, a research firm. Conventional mortgage rates are currently closer to 4 percent.
Greater participation could help the beleaguered housing market, which showed renewed signs of decline in data released on Tuesday, as well as help shore up the broader economy.
“The universe is much larger than what has come through the pipeline,” said Paul Ballew, chief economist at Nationwide Insurance. Mr. Ballew said that if 10 million more people refinanced and saved an average of $200 a month, that would work out to be about $240 billion a year of additional spending power in the economy.
Other economists and officials of the Federal Housing Finance Agency say it is unrealistic to expect all those borrowers to refinance. Some people are wary of government programs, while others will be put off by upfront application fees and the paperwork burden. Those who have home equity loans or second mortgages could face tougher approvals.
Since the refinancing program is optional, lenders may impose additional restrictions. What is more, it is costly to devote staff to refinancing applications, so lenders may simply be reluctant to do so.
Mr. Compton has calculated that a refinancing would save him and his wife, Lynne, about $275 on their $1,397 monthly payment. He has not missed a payment, despite being laid off from one job and enduring two pay cuts in the last two years. His salary is now roughly two-thirds what it was when they bought the house five years ago — a house that has since fallen in value.
The loan servicer, JPMorgan Chase, initially turned down the refinancing application because the Comptons had been living in another, smaller property they owned while renting out their main house.
The couple moved back in September and reapplied after changing their drivers’ licenses and utility bills.
This time, a loan officer told Mr. Compton, who works as a public transportation planner, that he did not qualify because his loan had been sold to two different investors. Mr. Compton said he confirmed through a government Web site that his loan was now owned solely by Freddie Mac.
“It angers me quite a bit,” said Mr. Compton, who added that unlike other borrowers, he never took out a home equity loan during the boom and has consistently paid his bills. The refinancing program, he said, should be “a perfect fit for me.”
He suspects that Chase — as well as other lenders — believe “that if you just tell people ‘no’ often enough, eventually they will just say O.K., and move on.”
After being asked about Mr. Compton’s case, a Chase spokesman said the company was investigating his file. “We are reaching out to the customer to see if we could refinance him through HARP 2,” said the spokesman, referring to the expanded government program, “or offer another option.”
Meg Burns, senior associate director for housing and regulatory policy at the Federal Housing Finance Agency, said the agency could not control individual lenders.
Article source: http://feeds.nytimes.com/click.phdo?i=bfc0f8d6e0b740f6e1063b4164d3dee1
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