WASHINGTON — The federal government said on Monday that it would overhaul a program that lets homeowners refinance mortgage loans at lower interest rates to address problems that have limited participation to less than a million borrowers, far below the lofty estimates when the program started in 2009.
The White House described the changes as part of a broader plan to boost the economy through measures that do not require legislative action, reflecting a pragmatic recognition that Congress is deadlocked on economic issues, and a political effort to blame Republicans for the standoff.
"We have far too many Americans who have paid their bills and done everything right on their mortgages and yet they're still stuck with interest rates of 6 or 7 percent," said Shaun Donovan, the secretary of Housing and Urban Development. The existing program, he said, "has not reached the scale that we had hoped and the scale that it needs to reach."
The broader refinancing program, which will still take months to implement, will let people qualify for new loans no matter how far the value of their homes have declined, and without regard to their financial situations so long as they have made at least six consecutive monthly mortgage 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.
The plan also seeks to encourage banks and mortgage companies to participate by eliminating their legal responsibility for problems with the original loan, a significant financial benefit in many cases.