President Obama spoke Wednesday on the state of America’s housing crisis, while detailing a proposed solution to help struggling homeowners refinance their homes further. The latest plan, which carries an estimated $5 billion to $10 billion price tag depending on the number of program participants, is designed to help those who have acted responsibly take advantage of low interest rates, President Obama said.
“It is wrong for anyone to suggest that the only option for struggling, responsible homeowners is to sit and wait for the housing market to hit bottom,” he said in a speech in Falls Church, Virginia.
The plan would allow for struggling homeowners—including those who are underwater on their loans—to refinance their mortgages into lower-rate government loans, saving an estimated $3,000 per year for the participants.
Borrowers would have to qualify for the program by satisfying several criteria: They must be current on their mortgages for at least the past six months and not missed a payment during that time; they must meet a minimum credit score of 580; their mortgage must fall under FHA conforming loan limits in their area; and the loan they are refinancing must be for a single family owner-occupied principal residence. The White House noted with respect to the credit score requirement that it expects nine out of 10 applicants to meet that criterion.
The program will allow borrowers with loans insured by Fannie Mae or Freddie Mac access to streamlined refinancing through the GSEs. Borrowers with standard non-GSE loans will have access to refinancing through a new program run through the FHA, according to the program specifications.
“For responsible borrowers, there will be no more barriers and no more excuses,” the White House stated in a press release.
The plan notes the creation of a separate fund for the new streamlined refinancing program, which it says will help the FHA better track and manage the risk involved and ensure that it has no effect on the operation of the existing Mutual Mortgage Insurance (MMI) fund.
Written by Elizabeth Ecker