ANCHOR: Meanwhile, the president is in Reno, Nev., touting mortgage refinancing for "responsible homeowners."
ANCHOR: The problem is the homeowners President Obama is using as an example may not be so responsible. What is this all about, Diana?
DIANA OLICK: Well, we don’t to say whether they are responsible or not, but something very interesting, the president three times so far in the speech he’s doing right this moment has used the word responsible, and administration officials have as well. The president in the past said that, "responsible borrowers were simply hit by lower home prices, houses that went underwater and they didn’t do anything to cause that." Well, they told us that this family, the Keller family of Reno, Nev., had a $168,000 mortgage but their home has depreciated to $100,000 because home prices in Reno, Nev., have dropped 50 percent since the peak of the housing market.
They talked about how they were underwater and got the refinance through a new government program the president is touting—an extension—and making that program even larger. Now, the trouble we had, though, is when we listened to those facts, they told us that the Kellers bought their home 14 years ago. That didn’t ring right somehow. So we looked into it, because 14 years ago, home prices were far lower. And, in fact, we did confirm from county documents and then from the White House that the Kellers, in fact, bought their home in 1998 for $127,000 with a $127,000 mortgage.
How do they now have a $168,000 mortgage? Because they did a cash-out re-fi in 2007, took out $51,000 to pay down debt on their family business. But, again, they saw that their home price had appreciated to $250,000. That is, their home price doubled in just eight years. So they took out $50,000. Our question then, of course: Are these responsible borrowers? Is the government saying that people who took money out of their home should then be qualifying for government assistance in these new refinance programs?
ANCHOR: It sounds like they didn’t—the Obama administration didn’t do their homework too carefully.
OLICK: They did their homework.
ANCHOR: It was 14 years ago. How do you miss that?
OLICK: I can tell you, we contacted H.U.D. Sec. Shawn Donovan and he told us, "This is is a family first and foremost that has met their responsibility, remained on time with their payments and used the equity in their home in a way that so many Americans do to send their kids to college, support small business, and save for retirement.
ANCHOR: So they are sticking to the story.
OLICK: It seems like the administration is saying, if you take out money from your home and use it for something good, then that’s okay as opposed to if you buy a car or redo the kitchen or something like that.
ANCHOR: As opposed to understanding what your full financial liabilities are over time and taking responsibility in that.
OLICK: Or watching house-price value double in eight years.
ANCHOR: Thanks, Diana. I say no, they are not responsible. I’ll be judgmental this afternoon on a Friday.
ANCHOR: It was the wrong couple to use, let’s put it that way.
ANCHOR: I bet you will have trouble finding the right one.