Obama Refi Plan Raises Doubts About Its Effectiveness

By Donna Borak

A proposal by the Obama administration to help more struggling borrowers refinance into cheaper loans is prompting a familiar question: Is this a program that can relieve the housing crunch, or just another band-aid? The plan — announced in President Obama’s third State of the Union address Tuesday — so far lacks much detail, although it would be paid for with a fee on large banks, and some expect it could even target loans not backed by Fannie Mae and Freddie Mac. But while some see benefits in such a broad scope for the program, others say it could be an administrative nightmare. There was some speculation that the administration wanted to announce in the State of the Union progress in pending settlement negotiations over servicing flaws. But absent news like that, some saw President Obama’s refinancing proposal as rushing out yet another plan with few details or signs that it can be an improvement on earlier programs. “The administration knew it needed to talk mortgages and knew it needed to bash big banks, this was plan B,” said Karen Shaw Petrou, a managing partner at Federal Financial Analytics Inc.