President Obama announced a plan today designed to help millions of homeowners around the country. While final details and rules & regulations will not be announced for two weeks, we learned some details today. The plan is scheduled to begin March 4.
Some homeowners will be able to refinance their existing mortgages, only on owner-occupied properties. There are several criteria they must meet. Owners must be current on their mortgage payments, must have a conforming loan (less than $417,000) that is owned or guaranteed by Fannie Mae or Freddie Mac, and apparently must owe more than 80% of their home’s value. Currently, lenders are not likely to refinance loans for borrowers who have less than 20% equity in their home. A further caveat: the new mortgage and refinancing costs must be no more than 105% of the current value of the home. Obama’s administration predicts that this plan will help up to five million “responsible homeowners.”
This initiative also aims to bring mortgage payments down to no more than 31% of borrowers’ income. The goal for this portion of the plan is for lenders to reduce interest rates on loans to bring monthly payments down to 38% of income and the government will further subsidize lenders and servicers to bring the ratio to 31%.
Check out this article from CNN for more information on this hot-button issue.
There are plenty of details surrounding this plan that I haven't included, such as the government throwing more money to Fannie and Freddie, etc., with the end goal being to keep mortgage interest rates down for some time.
What do you think? Is the plan going to work? Will it really help millions of at-risk homeowners?
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