Understanding Obama's Mortgage Refi Plan

On Monday, October 24th, President Obama announced plans to improve eligibility rules for homeowners who need to refinance their home loans to lower monthly payments. With interest rates at historical lows, it makes sense for homeowners to take advantage of the decreased interest rates. Obama hopes by changing the requirements for the Home Affordable Program that approximately 1 million homeowners will be able to qualify.

Understanding Obama’s mortgage refi plan:

In 2009 the HARP Program was put in place to allow homeowners to refinance their mortgage at a lower rate without having to meet the traditional 20% equity requirement. Under the current HARP guidelines, many borrowers have been unable to qualify for the program because in most cases, they are underwater by 25% or more in some areas. In addition to the negative equity, homeowners have also been unable to afford the costs associated with refinancing.

Changes to the HARP rules:

1.)    Fees to participate in the program will be waived.

2.)    Eligibility will not be contingent upon how far the home values have fallen.

Who can qualify for HARP?

1.)    Homeowners with a loan backed by Fannie Mae or Freddie Mac can qualify for HARP refinance.

2.)    Homeowners must be current on their mortgage.

When do the changes take effect?

We could see the changes take effect as early as December 1st of this year. In addition, the HARP Program will be extended through 2013 to allow more homeowners the opportunity to qualify.

President Obama hopes that if homeowners can lower their monthly mortgage expense they’ll be more likely to stay current on their payments and avoid foreclosure. They are estimating an average annual savings of $2,500 per household. He also hopes that the additional money they will be saving will help them spend on other things, which could provide a boost to the overall economy. Obama stated on Monday during his press conference, he realizes that aiding the housing market requires much more than a refinance plan.

If you would like to learn more about your home values or to learn how you can take advantage of Obama’s mortgage refi plan, please call or email us today.

Source: “A Guide to Administration’s New Mortgage-Refi Plan,” The Associated Press (Oct. 24, 2011) and “Refinancing Plan Won’t Help Housing Market Much,” CNNMoney (Oct. 24, 2011)
Daily Real Estate News, Tuesday, October 25, 2011