House Dems: Obama’s response to mortgage crisis is insufficient

Just hours after the Obama administration unveiled enhancements to its anti-foreclosure efforts, House Democrats are already saying it doesn’t go nearly far enough to help the millions of homeowners still struggling from the housing bust.

“It’s far too little, it’s just baby steps,” Rep. Dennis Cardoza (D-Calif.), a longtime critic of the administration’s housing policies, said in a phone interview. “They’re still not getting it.”

Cardoza, who announced last week he’ll retire at the end of 2012, noted that the housing collapse was a leading cause of the recession but among the last to be addressed.

{mosads}“We need to excise the cancer that caused the illness before the patient can recover,” he said.

Rep. Lois Capps, another California Democrat critical of the administration’s foreclosure-prevention efforts, echoed that concern Monday, saying “much more is needed” to stabilize the struggling housing market.

“Today’s announcement is an encouraging step forward, but it is only one of a number of steps needed to fully address the growing foreclosure crisis,” Capps said in an email.

On Monday, the Federal Housing Finance Agency (FHFA) — an independent agency that oversees Fannie Mae and Freddie Mac — announced a number of reforms to the Home Affordable Refinance Program (HARP), a 2009 program designed to prevent foreclosures by helping underwater homeowners obtain cheaper loans.

The program was estimated to help between 3 million and 4 million homeowners, but lenders are not required to participate, and fewer than 900,000 homeowners had benefited from HARP through August, FHFA said this week.

To boost those figures, FHFA is eliminating the current 125 percent loan-to-value ratio cap, effectively opening the door to more underwater borrowers. The agency is also getting rid of new appraisal requirements as well as some fees now charged to homeowners who refinance into shorter-term mortgages.

Rep. Elijah Cummings (Md.), senior Democrat on the Oversight and Government Reform Committee, welcomed the reforms Monday but warned that they’re only “one modest step” on the road to ending the foreclosure crisis.

“The changes announced today will provide additional relief for middle-class Americans and an important boost for our economy,” Cummings said in a statement. “But we must not stop here. Economists warn that the housing crisis is ‘ground zero’ for the economy and jobs, and this is only one modest step towards addressing it.”

Edward DeMarco, FHFA’s acting director, was quick to note that the changes won’t expand eligibility to all the nation’s homeowners, but focus instead on enticing participation from those already eligible for HARP.

“This is not a mass refinance program,” he said. “It was really designed to enhance the program’s access for those borrowers who have always been the eligible population.”

Cardoza was quick to praise certain elements of the FHFA’s new strategy, particularly the elimination of new property appraisals in cases where Freddie or Fannie have a “reliable” automated valuation model.

Still, the Blue Dog Democrat is also leery that the devil is in the details. He criticized the FHFA reforms for “doing nothing to get the banks to cooperate.”

Encouraging homeowners to refinance into shorter-term mortgages, for instance, will do nothing to lower their monthly bills even at lower interest rates, he noted. Cardoza is pushing legislation to help homeowners refinance while lengthening their payback period up to 40 years.

“The problem is they can’t pay, not that they want to pay it off quicker,” he said. “They should have more time to weather this crisis.”

Cardoza said the FHFA changes merely dabble at the edges of the problem when the severity of the crisis demands much bolder action. The proposal might help 800,000 homeowners, Cardoza estimated, when the problem is 11 million.

President Obama is expected Monday to promote the FHFA changes during a visit to Nevada, which has the highest foreclosure rate in the country.