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Obama proposes refinancing plan for homeowners, officials estimate $3,000 annual savings

January 25, 2012  |  by Anne

Published by Associated Press. Original article available on washingtonpost.com.

President Barack Obama proposed a new program during his State of the Union address Tuesday to allow homeowners with privately held mortgages to refinance at lower interest rates. The program would cover both loans issued by government-controlled mortgage giants Fannie Mae and Freddie Mac and private mortgage lenders. Congress would have to approve it, a difficult hurdle.

“There’s never been a better time to build, especially since the construction industry was one of the hardest-hit when the housing bubble burst,” Obama said. “Of course, construction workers weren’t the only ones hurt. So were millions of innocent Americans who’ve seen their home values decline. And while government can’t fix the problem on its own, responsible homeowners shouldn’t have to sit and wait for the housing market to hit bottom to get some relief.”A punctured housing bubble was at the center of the recession, prompting widespread foreclosures and leaving millions of homeowners with houses valued at less than their mortgages.

Under the plan, any homeowner current on his or her mortgage could take advantage of historically low lending rates. Mortgage rates have been below 4 percent for months.

The program would be paid for by a small fee on large banks, senior administration officials said.

Administration officials offered few details but estimated savings at $3,000 a year for average borrowers. It’s likely that millions of homeowners would be eligible, but they would have to seek out refinancing options under the program with their lender. Other government programs allow lenders to seek out potential applicants.

Further details of the program will likely be released in legislation in the next few days, officials said.

The new program would expand the Obama administration’s Home Affordable Refinance Program, which allows borrowers with Fannie and Freddie-backed loans to refinance at lower rates. Few people have signed up for that program. Many “underwater” borrowers — those who owe more than their homes are worth — couldn’t qualify.

About 1 in 4 Americans with a mortgage — about 11 million — are underwater, according to CoreLogic, a real estate data firm. Roughly 1 million homeowners have refinanced through the refinancing program. Government officials had estimated it would help 4 million to 5 million homeowners.

About half of all U.S. mortgages — about 30 million home loans — are owned by non-government lenders.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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6 responses to “Obama proposes refinancing plan for homeowners, officials estimate $3,000 annual savings”

  1. The Murray Home Team says:

    Still likely too little too late. The gov't should prioritize refinances for people who are on time, qualified and self employed. Make it easier for them to refi, take cash out, etc to help the stimulate. I feel for those underwater(i myself have underwater property) but this tiny adjustments just don't do it.

  2. Karen Donaldson says:

    The payout should be some equal amount based on the value of the property & truly $3,000 is a joke. Plus, this was posted on Jan. 25 & it is now the 31st & I've heard nothing more about it.

  3. Karen Donaldson says:

    According to the numbers provided by CoreLogic above @ 1 in 4 homeowners are "underwater", but that is such an over used term. Many homeowners perceive themselves as "underwater" because they have lost a huge amount of value in their home ( I have lost over $200,000 of the value of my home) & it is very difficult to refinance. Maybe 1 in 100 self employeed homeowners would qualify. So many of them just "throw in the towel" and stop paying their mortgage even though they can afford to! n Maryland some lenders are so far behind that you can live in your home for years without being foreclosed on. And many people think that is acceptable,which is one reason the foreclosures will continue.

  4. suzanne Valentin says:

    This would be helpful… any incentives help spur the market

  5. karen donaldson says:

    I just spoke with a client today and his biggest disappointment and frustration if hat he feels there is no consistance.

  6. karen donaldson says:

    Since half the loans are held by non gov't lenders.I wonder if the foreclosure rate is higher or lower with those loans?

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