One of the forgotten options available to homeowners is the FHA Streamline refinance. Homeowners with an FHA loan and good credit can refinance to a lower interest rate without an appraisal. Given that appraisals are the main obstacle to refinancing (your home appraises for less than your loan balance), many conventional mortgage holders have been unable to refinance, even though their credit and payment history are good.
It's time for a change in Fannie Mae and Freddie Mac guidelines to allow streamline refinancing of conventional loans. The main requirement would be good credit but no appraisal. The impact on the housing market, as well as the total economy would be huge.
A distressed homeowner who may have lost his job or taken a large pay cut could take advantage of the low interest rate and reduce his monthly payment several hundred dollars. This could allow him to stay in his house and not go into foreclosure. That means fewer foreclosures coming into the market and an easing on price pressure.
On the other hand, a homeowner who is comfortable with his house payment could refinance to a lower rate and payment and have the difference in the payments to put back into the economy through purchasing or investment.
Think about it! Fewer foreclosures and short sales and $200 to $500 a month of disposable income per family almost immediately! It would most likely be a wash for the banks, given the loss and cost of foreclosure.
I think we should all write to our congressman.
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