A federal plan to help more underwater homeowners refinance their mortgages drew praise and skepticism Monday as a cure for what ails the housing industry.
Rep. Mike Thompson, a St. Helena Democrat who has been a critic of the Obama administration's housing efforts, reflected the mixed reaction to the expanded refinancing program. He called the effort a "welcome but incremental change" on the housing front.
"I don't think it comes close to where we need to be or what we need to do," Thompson said.
Local loan officers said many clients will likely seek to take advantage of the expanded federal program. However, they said, that still amounts to just a fraction of underwater homeowners.
"Is that really solving the problem?" asked Scott Sheldon, a loan officer with W.J. Bradley Mortgage Capital in Santa Rosa. "I think it's a band-aid more than anything."
The expanded effort was announced Monday by federal officials in Washington and touted on the campaign trail by President Barack Obama.
The new rules would allow refinancing for homeowners whose loans belong to the portfolio of government-owned agencies Fannie Mae and Freddie Mac.
Under current rules of the Home Affordable Refinance Program, homeowners can refinance only if their mortgage amounts don't exceed 125 percent of the home's value. That 125-percent limit will be lifted, but the details aren't scheduled for release until Nov. 15. As such, many borrowers may have to wait until early 2012 to apply for refinancing.
To be eligible, borrowers must not have not missed a mortgage payment for the past six months.
Certain fees will be eliminated for those who accept shorter-term loans — down from 30 years to 15 or 20. Such a change won't provide a big drop in monthly payments but will help homeowners who want to more quickly pay down principal on their loans.