Feds Say Refinancing Program Starting To Work

Washington, DC, April 10, 2009--U.S. Housing Secretary Shaun Donovan said that the two-month-old Making Home Affordable program was beginning to work.

In a conference call from Washington, Donovan said numbers provided by the President's Council of Economic Advisers showed fixed rates had fallen to record lows since the plan was unveiled in mid-February. The 30-year fixed rate averaged 4.87 percent yesterday, up slightly from last week, Freddie Mac reported.

By refinancing to a lower rate through the program, Donovan said, the typical borrower could save $2,000, and those struggling to pay their mortgages might avoid foreclosure.

Making Home Affordable allows refinancing by homeowners with loans owned by Fannie Mae or Freddie Mac who are current with their mortgage payments and whose first mortgage does not exceed 105 percent of the current market value of the property.

Bank of America, which services 20 percent of the nation's 46 million residential mortgages, said it had begun processing "the first wave" of mortgage-refinance applications under the program.

Barbara Desoer, president of Bank of America Mortgage, Home Equity, and Insurance Services, said 200,000 homeowners had contacted the bank in the last two months inquiring about their eligibility.

According to Freddie Mac, low interest rates have boosted refinance applications by 129 percent in the last five weeks. Yet mortgage experts said the lion's share of those applications were made by people who could easily qualify even under today's tighter credit guidelines.