Travis Armstrong, a long-haul trucker, has made his mortgage payments for six years and has a credit score of about 800 that would entice most lenders. Because he owes more than his home is worth and his debt lacks federal backing, he’s stuck paying 7.5 percent interest, almost twice the rate of new loans.
U.S. President Barack Obama has failed to win Congressional backing for his proposal to expand eligibility for government- backed refinancing nationally to include people with mortgages like Armstrong’s. The only inroad so far -- a $10 million pilot program that began last month in Oregon that will purchase mortgages out of bonds and refinance them -- won’t help Armstrong, though. He lives about 14 miles (23 kilometers) from the only county accepting applications.
“It’s OK to skip payments and get help, or walk away and let the bank foreclose, but I’m stuck with no help ’cause I keep making my payments every month,” Armstrong said in a mobile phone interview from Interstate 64 in Illinois as he headed to Oregon. “It feels like the world has forgotten about people like me.”
As the U.S. real estate recovery accelerates into its second year, home prices are still 26 percent below the 2006 peak and almost 10 million people are underwater, or owe more than their houses are worth. While some of the hardest-hit regions such as Phoenix and Las Vegas are rebounding the fastest, cities like Cleveland are struggling to keep pace with national gains.
‘Uneven Healing’
Federal efforts to put the rebound on firmer footing and boost the economy by helping subprime borrowers like Armstrong so far have fallen short, said Diane Swonk, chief economist at Chicago-based Mesirow Financial Inc.
“The housing market is healing, but it’s healing unevenly,” said Swonk. “Part of clearing out the bottom and keeping the momentum of the recovery going is putting underwater loans on firm ground.”
Expanding eligibility for the government’s Home Affordable Refinance Program, or Harp, is at the top of the White House’s agenda for housing. The effort is dubbed ‘Where’s my refi?’’ Treasury, which funds the nation’s anti-foreclosure efforts, supports the program, said Andrea Risotto, a spokeswoman. Four years after the peak of the foreclosure crisis, Treasury has spent only a fifth of the $38.5 billion of funds from the Troubled Asset Relief Program, or Tarp, set aside for housing.
‘Out There’
“This is where you get to the heart of the subprime lending problem -- these expensive private loans where people kept paying,” Swonk said. “It’s easy to forget they are still out there.”