3 new programs aimed at improving the housing market

A mass-refinancing plan would allow borrowers who owe more than their house is worth but who are current on their loan payments to refinance at today's low interest rates. The plan would save such borrowers an average of $3,000 annually. The catch: Congressional approval of a fee paid by the largest lenders to fund the program is unlikely.

A pilot buy-to-rent program launching this year in hard-hit markets will let investors buy foreclosures from Fannie Mae, then rent them out. Look for the program in Atlanta, Chicago, Las Vegas, Los Angeles, Phoenix and parts of Florida. Investors must qualify to participate (for information, go to www.fhfa.gov). The aim is to make a quick dent in the supply of foreclosures for sale. Success depends on whether bargain-hungry investors pay the prices Fannie expects for its properties.

None of the programs is a quick fix. In fact, the pace of foreclosures will continue to pick up in the wake of a $25 billion settlement reached in February among the federal government, attorneys general in 49 states and the nation’s largest mortgage servicers. Although much of that money is slated for principal reductions, refinancing and other consumer assistance, banks are now free to step up foreclosures that were delayed pending the settlement.
Foreclosure fixes will become moot as the economy gains traction and housing demand picks up. By 2013, the number of distressed sales will still be high, but their share of total home sales will decline, allowing home prices to rise. The speed of recovery depends on how big a market share distressed properties represent.