U.S. readies stronger lifeline for homeowners (Reuters)

WASHINGTON (Reuters) – Homeowners who owe more than their houses are worth will get new help to refinance in a government plan to be unveiled as early as Monday to support the battered housing sector, sources familiar with the effort said.

The Obama administration has been working with the regulator for Fannie Mae and Freddie Mac to find ways to make it easier for borrowers to switch to cheaper loans even if they have little to no equity in their homes.

The regulator, the Federal Housing Finance Agency, intends to loosen the terms of the two-year-old Home Affordable Refinance Program, which helps borrowers who have been making mortgage payments on time but who have not been able to refinance as their home values have dropped.

Officials have been frustrated that attempts to bolster housing -- the epicenter of the deepest U.S. recession since the Great Depression -- have borne little fruit. Some top Federal Reserve officials want the central bank to consider buying more mortgage-backed securities as a way to help.

While housing prices have stabilized recently, they remain almost a third below the peak reached in 2006.

HARP has been criticized by both Democratic and Republican lawmakers as ineffective in reducing foreclosures, and the changes under consideration are unlikely to be a panacea.

After meeting with the head of FHFA earlier this month, one lawmaker said an expanded program could help as many as 600,000 to one million troubled borrowers avoid foreclosure.

But that is only a fraction of the estimated 11 million homeowners who are underwater, meaning they owe more than their homes are worth.

A further boost to housing could come from the settlement of a long-running probe into mortgage servicing and foreclosure abuses by top banks, which could result in up to $25 billion in homeowner relief.

WHITE HOUSE PUSH

HARP is currently open to borrowers whose mortgages are owned or guaranteed by Fannie Mae or Freddie Mac as long as their loans do not exceed 125 percent of their homes' values.

The sources said FHFA will lift that threshold, but how high is unclear.

Another change may include the possibility of easing the fees tied to mortgages refinanced under HARP, according to the sources.

Some homeowners who would like to participate in the program do not because of the high fees involved. Currently, borrowers with little home equity face increased charges as a result of the so-called risk-based pricing Fannie and Freddie use to protect themselves against taking on too much risk.

"I really think at this stage of the game that none of these programs are going to have the breadth, scope and energy to make a major difference," said Steve Blitz, senior economist for ITG in New York.

The Obama administration and FHFA are also trying to settle differences on whether or not to waive so-called "reps and warranties." Representation and warranty agreements are essentially contracts that outline the incentives of originators, issuers, and investors when a loan is sold and securitized. They also stipulate that an originator is required to buy back loans that violate terms of the agreements.

The sources said it was unlikely FHFA would waive the agreements altogether, although it was examining its options.

When HARP was introduced in March 2009, the Obama administration predicted it would help as many as 5 million homeowners. So far, however, only 893,800 borrowers have refinanced their loans through August by using HARP.

The White House sees the effort to widen HARP as way to stimulate the economy more broadly by lowering consumer mortgage bills to free-up more money to spend elsewhere. A drop in mortgage rates to record lows has added urgency to the effort.

FHFA, however, has proceeded cautiously, concerned about making changes that could undercut the financial health of Fannie Mae and Freddie Mac, which have already taken $141 billion in taxpayer funds since being seized by the government in September 2008.

"With HARP responsible for less than 1 million refinancing and mortgage rates below 4 percent, we need to pick up the pace," Housing Secretary Shaun Donovan told a conference earlier this month.

Fannie and Freddie, combined with the Federal Housing Administration, support about 90 percent of the mortgage market.

(Reporting by Margaret Chadbourn; Editing by Andrew Hay)

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East Coast readies for "big, bad" Hurricane Irene (Reuters)

WILMINGTON, North Carolina (Reuters) – The United States urged 55 million people on its East Coast on Friday to prepare for the onslaught of massive Hurricane Irene, which President Barack Obama warned could be "extremely dangerous and costly."

"All indications point to this being a historic hurricane," Obama said, as Irene, a wide storm packing winds of more than 100 miles per hour, bore down on the North Carolina coast for an expected landfall on Saturday.

Hundreds of thousands of vacationers and residents were evacuating from coastal areas there and further northward up the East Coast.

Forecasters expect the menacing, broad hurricane to rake up the densely populated eastern seaboard starting on Saturday, then extend on Sunday to New York, America's most populous city with more than 8 million residents, and then into New England.

"The wind field is huge," National Hurricane Center Director Bill Read told Reuters Insider.

The NHC said hurricane force winds extended outward up to 90 miles from Irene's center, while tropical storm force winds extended out to 290 miles, giving the storm a vast wind field width of nearly 600 miles.

Federal and state leaders, from Obama downward, urged the millions of Americans in the hurricane's path to prepare and to heed evacuation orders if they received them.

"If you are in the projected path of this hurricane, you have to take precautions now .... don't wait, don't delay," Obama said, speaking from the island of Martha's Vineyard off the Massachusetts coast where he is vacationing.

"We all hope for the best but we have to be prepared for the worst," Obama added.

In earlier comments, NHC chief Read said Irene, which will be the first significant hurricane to affect the populous Northeast in decades, would lash the eastern seaboard with tropical storm-force winds and a "huge swath of rain" from the Carolinas to New England.

He said North Carolina would start seeing tropical storm conditions on Friday afternoon. Cities like Washington, Baltimore, Philadelphia and New York could experience heavy rain and wind and power outages from the weekend.

Irene weakened early on Friday to a Category 2 hurricane from a 3 on the five-step Saffir-Simpson scale, but it still was carrying winds of up to 105 miles per hour.

At 11 a.m., its center was churning north 330 miles south-southwest of Cape Hatteras, North Carolina.

The Miami-based hurricane center suggested on Friday Irene may already have peaked during its passage over the Bahamas, when its wind speeds made it a Category 3 "major" hurricane.

But it could still roar up the eastern seaboard as a broad and dangerous Category 2.

"BIG, BAD STORM"

Coastal communities from the Carolinas to New England stocked up on food and water and tried to secure homes, vehicles and boats. States, cities, ports, hospitals, oil refineries and nuclear plants activated emergency plans.

"We've been through about four or five (hurricanes), but this looks like it'll be the worst," Henry Burke, a vacation homeowner in Atlantic Beach, North Carolina, told Reuters.

Homeland Security Secretary Janet Napolitano urged residents not to delay precautions. "The window of preparation is quickly closing," Napolitano said.

"This is a big, bad storm," North Carolina Governor Bev Perdue told CNN.

Maryland Governor Martin O'Malley told the TV network: "Anyone who thinks this is just a normal hurricane and they can stick it out is being ... selfish and stupid."

The capital was also expected to feel heavy wind and rain. Extensive flight and rail service cancellations were expected.

Federal Emergency Management Agency (FEMA) chief Craig Fugate warned millions on the seaboard to expect power outages "for days," flash-flooding and strong winds.

EQECAT, a company that helps the insurance industry predict disaster damage, said Irene's forecast track represented "one of the worst-case scenarios" for the United States.

Wall Street firms scrambled to raise cash into early next week in case Irene causes major disruption in trading.

The repurchase market, a major source of cash for Wall Street firms to fund trades and operations, showed an increase in interest rates on loans that mature on Monday, a sign markets are worried there could be disruptions, if only temporary.

Northeast oil, natural gas and power facilities also made preparations.

Oil prices rose slightly in choppy trade on Friday as traders weighed the approach of Irene toward refineries on the coast against concern about the health of the U.S. economy.

NORTHEAST CITIES PREPARE

Coastal evacuations were under way in North Carolina and were ordered for beach resorts in Virginia, Delaware and Maryland. Airlines began to cut flights at eastern airports.

North Carolina, Virginia, Maryland, Delaware, New Jersey, New York and Connecticut have declared emergencies.

Irene will be the first hurricane to hit the U.S. mainland since Ike pounded Texas in 2008.

New York Governor Andrew Cuomo said on Friday that New York City's mass transit system, the nation's biggest that serves 8 million riders a day, will be shut beginning around noon on Saturday because of expected flooding and high winds from Irene.

Cuomo said in a statement the loss of subways, buses and commuter lines that serve the city and nearby suburbs could complicate evacuations.

In Washington, Irene forced the postponement of Sunday's dedication ceremony for the new memorial honoring civil rights leader Martin Luther King Jr. Tens of thousands of people, including President Barack Obama, had been expected to attend.

Flooding from Irene killed at least one person in Puerto Rico and two in Dominican Republic. The storm knocked out power in the Bahamian capital, Nassau, and blocked roads with trees.

(Reporting by Jane Sutton, Tom Brown, Manuel Rueda in Miami, Daniel Trotta, Richard Leong, Joan Gralla and Ben Berkowitz in New York; Jeremy Pelofsky and Vicki Allen in Washington, Laura MacInnis and Alister Bull on Martha's Vineyard; Writing by Pascal Fletcher; Editing by Philip Barbara)

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