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Obama Plan to help homeowners hold onto their houses

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Home Builder with 180 Degree Floors

The Obama Plan to help homeowners hold onto their houses by refinancing their mortgages is getting underway today. There are three core elements to the program.  All the details are available at: http://www.treas.gov/press/releases/reports/housing_fact_sheet.pdf.  

People with LTVs between 80% and 105%, and this is the group that is the focus of the Obama Plan. They may have had an LTV when they purchased the house of less than 80%, and have been paying their mortgage each month, but in the early years of a mortgage, not much goes to principal. So even if prices had remained flat, after 5 years they would have only been down to about a 75% LTV. But last year, housing prices in the 20 largest metro areas declined by 18.2%, which pushed their LTV well above the 80% level, which has locked these people out of refinancing.

If they could refinance, they could save a lot of money each year. If someone has a $200,000 mortgage at 6.5%, and they were able to refi at the current rate of 5.16%, they would save $2,300 per year. That is almost 3 times the size of the household tax cuts ($800) in the stimulus package. There is a certain amount of luck involved here, since the current mortgage has to be held or backed by FNM or FRE, which are involved with about half of all mortgages. Still, it is estimated that this program could help between 4 and 5 million homeowners.

Ronell Moore

615-482-1498

Commercial/Residential

Mortgage Broker

Posted by

Ronell D. Moore

Small Business Consultant

615-625-5274

 

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