Tuesday, June 30, 2009 | 10:31 a.m.
WASHINGTON -- Democratic Rep. Dina Titus continues her campaign to change the mortgage equity requirements for homeowners wishing to refinance under Obama’s housing plan, seeing an opening in the Treasury Department’s full review of the program.
In a letter to Treasury Timothy Geithner today, Titus wrote that because many Las Vegas homeowners are so severely underwater on their mortgages, she does not believe the Making Home Affordable plan “will be as effective in areas that have been hardest hit by the crisis.”
The president’s plan requires that homeowners seeking to refinance their government-backed loans through Fannie Mae or Freddie Mac be no more than 5 percent underwater on the mortgages. That means a homeowner with a house valued at $200,000 cannot owe more than $210,000. That’s a problem in Southern Nevada where home values have fallen 50 percent and nearly 70 percent of the mortgages are underwater, some severely.
“Many people who purchased a home in the last few years have found that, due to no fault of their own, they are in negative equity,” Titus wrote. “They do not want to walk away from their mortgages but have serious concerns about the actual value of their homes.
“By enabling more families to refinance their current mortgage, we will not only allow them to stay in their homes, we will take an important step toward ending the current housing crisis,” she wrote.
The Sun reported last week that President Barack Obama has asked Geithner for a review of the housing plan to evaluate “what’s working and what’s not, and whether there’s more that we can do.”
“I was pleased to learn that President Obama has asked you to undertake a top to bottom review of the housing crisis and the programs that have be instituted,” Titus continued. “I urge you to consider the situation in Las Vegas, as well as other communities that have been similarly affected by the housing crisis, in your review.”
Titus recently wrote a similar letter to the Federal Housing Finance Agency, which indicated in its response that it is working with Treasury on the issue.
Concerns have been raised over taxpayer liability. If homeowners default on the refinanced loans, the government would be left holding mortgages that are worth more than the current value of the of the homes.
The director of the agency, which regulates Fannie and Freddie, told The Wall Street Journal in May: “It’s a question that we’re looking at.”
Senate Majority Leader Harry Reid has similarly asked Geithner to consider lowering the equity requirement. The senator’s office has said indications are the request is being favorably reviewed.
A separate part of the Obama housing plan is for those homeowners at imminent risk of foreclosure. It aims to help them work with their lenders to modify mortgages so they consume no more than about one-third of a borrowers’ income.
The New York Times offers a glimpse into what happens when homeowners try to get their loans reworked. It’s not pretty.