During the State of the Union Address a few weeks ago, President Obama announced plans for a new refinancing plan to help Americans, today he announced a series of proposals to make those plans a reality.
What Does The Plan Do?
The goal of the program is to help borrowers that are current on their mortgages refinance into lower-interest federally insured loans through the FHA. Borrowers would qualify even if they are underwater on their mortgages (their homes are worth less than is owed on them) and would enable these homeowners to take advantage of the historically low interest rates available today.
According to senior administration officials, the plan would be run by the FHA (Federal Housing Administration) and is reported to cost between $5 billion to $10 billion, money which would be raised by imposing levies on banks.
President Obama On His New Refinancing Plan
“This plan, like the other actions we’ve taken, will not help the neighbors down the street who bought a house they couldn’t afford and then walked away and left a foreclosed home behind. It’s not designed for those who’ve acted irresponsibly, but it can help those who’ve acted responsibly.”
Obama’s Refinance Plan Eligibility Requirements
The big question is who qualifies for the program and how?
To Be Eligible:
- Borrowers need to be current on their mortgages
- No missed mortgage payments in last six months
- There is a minimum credit score requirement (FICO) of 580
- Must be employed
- Must have a conforming loan (between $271,050 and $729,750 depending on their location)
- Officials have also stated that an appraisal would not be necessary.
Estimates are that the plan could help 3.5 million borrowers in addition to the 11 million expected to qualify for the existing refinance program for those with Fannie Mae and Freddie Mac loans (HARP). The one sticking point could be the mortgage insurance premiums charged by the FHA. If rolled into the loan, they would put a borrower further underwater.
How Do I Learn More About This Plan?
Details about the plan are still emerging and it still faces approval by Congress. There are also critics of the plan, so whether or not its components will be approved by Congress in their current form still waits to be seen.
To get FREE future updates about Obama’s refinance plan, please subscribe to our RSS Feed at the top of this article!