Obama Announces New Mortgage Refinance Aid
Feb 1st, 2012 @ 8:13 PM by Amber Nelson
On Wednesday, President Barack Obama announced some modifications to his administration’s previous foreclosure-prevention plans in hopes of extending relief to more struggling homeowners.
“I am sending Congress a plan that will give every responsible homeowner in America a chance to save about $3,000 a year on their mortgage by refinancing at historically low rates,” he told an audience in Falls Church, VA as quoted in a New York Times article. “No more red tape. No more runaround from the banks.”
The President did admit that previous efforts have been less effective than expected, but he said this new round of incentives should do better.
The first change to the government’s refinance program, as proposed by Obama, will be to allow the Federal Housing Administration (FHA) to refinance all qualified applicants with privately-held mortgage loans. The program will be paid for by a fee charged to big banks. The overall cost of the initiative is estimated at $5 billion to $10 billion. Homeowners would have to be current on their mortgage payments, have high interest rate home loans, and have a credit score above 580. Their home value must also be between the FHA guidelines of $270,000 to $730,000, depending on location. The Obama administration predicts that there are about 3.5 million homeowners in this category who could benefit from this refinancing plan.
There are another 11 million whose loans are backed by mortgage giants Fannie Mae and Freddie Mac, who could participate in the new program. Another part of the plan is to get Fannie and Freddie to eliminate their appraisal fees and broaden their base of borrowers who qualify for refinancing.
Many parts of the President’s plan would require the approval of Congress, a very uncertain move at this point, as the plan has already been met with much criticism from House Republicans.
“We’ve done this at least four times where there’s some new government program to help home owners who have trouble with their mortgages. None of these programs have worked. I don’t know why anyone would think that this next idea is going to work,” said House Speaker John Boehner in a USA Today article.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.