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Obama offers more relief for homeowners

Plan expands refinancing program

WASHINGTON - The federal government’s expansion of a mortgage refinancing program could reduce the monthly payments of up to 1 million homeowners, but analysts said the modest scope of the plan meant that it would probably do little to heal the housing market or help the broader economy.

The effort, built on sweeping voluntary agreements with the mortgage industry to let people refinance even if their homes have declined in value, reflects a new White House emphasis on economic measures that do not require Congress to overcome its partisan divisions.

It also maintains a choice that President Obama made in the early days of his administration to focus on reducing monthly payments rather than on the amounts that borrowers owe, the latter being what a growing number of liberal and conservative economists consider necessary to resolve the problem.

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Republicans, including the presidential candidates, generally oppose federal aid for distressed homeowners as a bailout for people who made bad choices. The new program, and the emphasis on unilateral action, seem likely to inflame that opposition.

The plan’s modesty, meanwhile, may not assuage Democrats’ anger at the administration for doing too little to help homeowners repair their shattered finances.

Speaking in Las Vegas yesterday - in the center of the housing crisis and in a presidential battleground state - Obama addressed both groups of critics. The problems required government action, he said, and while the new changes were not by themselves sufficient, “that is no excuse for inaction.’’

“I’m here to say that we can’t wait for an increasingly dysfunctional Congress to do its job,’’ he said. “Where they won’t act, I will.’’

Yesterday’s announcement is an effort to revive a program that has fallen well short of expectations since it was announced in 2009. Under the program, the government-owned mortgage companies Fannie Mae and Freddie Mac have financed new loans for almost one million borrowers who could not qualify for traditional loans because of declines in their homes’ values.

The expansion, announced by the Federal Housing Finance Agency, aims to double that number - although that would still be a small share of the more than 10 million homeowners with loan balances larger than the values of their homes.

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The changes, which will take effect over several months, will let people qualify for new loans no matter how far the values of their homes have fallen, so long as they have made at least six consecutive monthly payments. The plan also will reduce the fees that borrowers must pay, for example, by dispensing with the need for an appraisal in many cases and by automatically transferring mortgage insurance to the new loan.

Administration officials said that refinancing could reduce the average borrower’s annual payments by about $2,500, multiplied by up to 1 million households - about $2.5 billion available for spending on other things.

But the actual impact will be smaller, even if the program achieves its goals, because households are not likely to spend all of their savings, and because some of the money will come from other households that held the loans as investments.