More Details Expected Soon on Negative Equity Refis

Treasury secretary testifies before Congress

Oct. 6, 2011

By MortgageDaily.com staff

Timothy Geithner, secretary of the Department of the Treasury, testified today before the Senate Finance Committee.

The secretary is also chairman of the Financial Stability Oversight Council, which seeks to prevent the kinds of systemic risks that caused the financial crisis and recession.

He added that the council emphasizes the importance of broader reforms to help return private capital to the housing market, strengthen mortgage underwriting and reduce the government’s role in the housing markets over time.

“As we proceed with these reforms, we want to make sure that we are encouraging, not undermining, the prospects for broader recovery in the housing market,” Geithner stated.

In response to a question by Sen. Robert Corker Jr. (R-Tenn.) about a “massive refi,” Geithner said that only a limited number of borrowers are taking advantage of low-rate refinances “for a whole range of reasons.”

But in response to a question posed by Sen. Jack Reed (D-R.I.), he noted that the Federal Housing Finance Agency is considering reforms that would enable negative-equity borrowers to take advantage of today’s low interest rates — a move that he said would have the same impact as a tax cut.

Geithner said more clarity is expected to be provided on eased refinance requirements within the next few weeks.

“I think the most important things we can do now, apart from trying to do anything we can to make the economy stronger, is to help more people refinance, even people underwater,” Geithner testified.

He also expressed support for converting real-estate-owned properties into rental housing, though preventing foreclosures was what he considered most important.