In an effort to boost the economy, President Barack Obama announced changes to the existing home refinancing plan that would allow “underwater” homeowners to save money on their mortgages.
Obama spoke in Nevada, the state with the highest foreclosure rate, to announce changes that would allow homeowners who owe more money than their homes are worth and have federally-backed mortgages to take advantage of the low interest rates.
In the past, there was a cap on homeowners with mortgages 125 percent of their property values set by the Home Affordable Refinance Program. HARP was created in 2009 in the aftermath of the housing bubble.
Curt Grimm, dean’s professor of supply chain and strategy at the University of Maryland, doubts the effectiveness of the changes due to the sheer scope of homeowners who need help. The Obama administration hopes to target roughly 1 million homeowners.
“It gives them some relief because they’re not paying as much each month [since] the interest rates have gone down,” said Grimm, “but their mortgages will still be underwater. So it’s not a panacea, [but] the objective is a good step to take.”
Government and politics assistant professor Stella Rouse also agreed that the changes would have minimal effects, but that the president has been stuck without congressional support.
“I think [Obama’s] doing what he can do to try and help people in trouble,” said Rouse, “but the stalemate in Congress really handcuffs [the president].”
This plan is something he can do to help bolster the economy right now, Obama said during the announcement.
The independent Federal Housing Finance Agency will publish the final changes to HARP in November.