HUD secretary pitches housing assistance program in Triangle

Obama wants to make lower lending rates a possibility for millions of borrowers who have not been able to get out from under burdensome mortgages, and he has suggested paying for the estimated $5 billion to $10 billion cost with a fee on the nation's largest banks.

Despite interest rates at historic lows, banks have been reluctant to refinance loans of "underwater" homeowners – those who owe more on their mortgages than their properties are worth. Obama called for creating a new program through the Federal Housing Administration that would have the government assume the risk for the new mortgages, making it easier for people to refinance.

U.S. Housing and Urban Development Secretary Shaun Donovan said Thursday that about 200,000 North Carolina homeowners are underwater on their mortgages.

"If you have other debt – you might have a second lien, you might have medical debt or student loans or other things that are stopping you from refinancing – this would help you," Donovan said following an appearance at Triangle Family Services in Raleigh.

Adriane Punter, who has been unemployed since September 2009, was turned down when she tried to refinance the mortgage on her Wake Forest home. She pays an interest rate of almost 7 percent, which is about twice the rate banks are now charging on 15-year mortgages.

"I'm going to need to refinance where I can be able to pay this mortgage payment on less than I was making in the past," said Punter, who starts a temporary job next week. "(It) would free up a lot of money for me to even put gas in the car."

The proposal also calls for cutting the fees charged for refinancing mortgages, which Donovan said would make that option available for more homeowners.

"In the long run, you could save money by bringing your annual payments or your monthly payment down, but you don't have the upfront cost, so this will help," he said.

The administration estimates that the average family would save $3,000 a year under the program.

The potential impact of the plan could be limited, however, by the fact that it wouldn't apply to borrowers who are behind on their home loan payments, making them most threatened by foreclosure.

Congressional critics say there's no guarantee new loans won't be as risky as those that led the housing market to collapse in 2008. They said the government should let the market work through its difficulties on its own.

"We just think it's fair for banks who contributed to this problem by making loans that folks couldn't afford and helped create the housing bubble, that they ought to be part of the solution as well," Donovan said.

To qualify for the program, homeowners must be current on their payments for at least six months and not have missed more than one payment in the six months preceding that. Their loans also would have to fall within the mortgage limits set by the FHA in their home counties.

About 11 million Americans – roughly one in four with mortgages – are underwater, according to CoreLogic, a real estate data firm. Half of all U.S. mortgages – about 30 million home loans – are owned by banks and other non-government lenders.