New Refinance Proposal For Underwater Homeowners. It is not a secret to anyone that many properties today are worth less than the mortgage on the property, this is referred to as being underwater. Homeowner who own these properties would like to refinance to be able to take advantage of the unbelievable low interest rates that are available these days, but can't. FHA has recently modified their guidelines to their Streamline Refinance Program to allow Homeowners who purchased their home prior to June 1, 2009 with an FHA Loan, to be able to refinance regardless of the present value of the property. This has caused a rush to refinance by these Homeowners, but others do not presently have an avenue to do the same.
Government efforts to create programs to allow the remaining Homeowners to refinance have fail, and have only created false hope, and more expense to the American Tax Payer. In light of this Oregon Democrat Senator Jeff Merkley thinks that he has the answer, and has announced a New Refinance Proposal For Underwater Homeowners. Merkley's plan is to create a one-time trust which would be created through the sale of bonds. The trust would then be used to purchase refinance loans made by Lenders to Homeowners who are underwater on their property.
The way that this trust is suppose to work is that as banks refinance underwater properties, the trust will then act much like an Investor, and purchase these loans from the banks. Because the trust would be funded through the sale of bonds, there would not be any need for tax payer money. This all sounds good, but I have yet to see anything that is established by the government that does not at some point cost tax payers money.
I am all for a New Refinance Proposal For Underwater Homeowners which will help these Homeowners refinance it to lower interest loans, but forgive me if I am a little skeptical about it. My skepticism stems from doubt that anyone is going to purchase bonds, which will be used to refinance properties that are not worth what they are being refinanced for. I am not a finance major, but I fail to see how that will make money for the people purchasing these bonds. Maybe someone can explain this to me, because I have not read anything yet that has offered up an explanation.
In the mean time it will be interesting to see if Senator Merkley's New Refinance Proposal For Underwater Homeowners will have any success in being adopted on Capitol Hill, especially during an election year. If this is adopted and bonds fail to sell as projected, will the refinances still be allowed to be made, and if so where will the money come from? I know the answer, but I just had to ask it.
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