On February 1, 2012, President Obama rolled out a comprehensive proposal titled, "Plan to Help Responsible Homeowners and Heal the Housing Market." The President summarized the basics of the plan, the heart of which would make it easier for an estimated 1 million "underwater" homeowners with good repayment records to refinance their mortgage at today's low interest rates.
Key components of the President’s plan include:
Providing Conventional Loan Borrowers Access to Simple, Low-Cost Refinancing: President Obama is calling on Congress to pass legislation to establish a streamlined refinancing program. The refinancing program will be open to all conventinal loan borrowers with standard (non-jumbo) loans who have been keeping up with their mortgage payments. The program will be operated through the FHA.
Simple and straightforward eligibility criteria: Any borrower with a loan that is not currently guaranteed by the GSEs can qualify if they meet the following criteria:
• They are current on their mortgage: Borrowers will need to have been current on their loan for the past 6 months and have missed no more than one payment in the 6 months prior.
• They meet a minimum credit score. Borrowers must have a current FICO score of 580 to be eligible. Approximately 9 in 10 borrowers have a credit score adequate to meet that requirement.
• They have a loan that is no larger than the current FHA conforming loan limits in their area: Currently, FHA limits vary geographically with the median area home price – set at $271,050 in lowest cost areas and as high as $729,750 in the highest cost areas
• The loan they are refinancing is for a single family, owner-occupied principal residence. This will ensure that the program is focused on responsible homeowners trying to stay in their homes.
• Streamlined application process: Borrowers will apply through a streamlined process designed to make it simpler and less expensive for borrowers and lenders to refinance. Borrowers will not be required to submit a new appraisal or tax return. To determine a borrower’s eligibility, a lender need only confirm that the borrower is employed.
Giving Borrowers the Chance to Rebuild Equity in their Homes Through Refinancing: All underwater borrowers who decide to participate in either HARP or the refinancing program through the FHA outlined above will have a choice: they can take the benefit of the reduced interest rate in the form of lower monthly payments, or they can apply that savings to rebuilding equity in their homes. The rebuilding equity program, when combined with a shorter loan term of 20 years, will give the majority of underwater borrowers the chance to get back above water within five years, or less.
The President's housing initiative has other elements as well: 1) a Homeowners' Bill of Rights, which would lay out a "single set of standards to make sure borrowers and lenders play by the same rules"; 2) a pilot program to transform foreclosed owner-occupied properties into rentals; 3) create one year of loan forbearance for borrowers looking for work; 4) pursue joint agency investigations into mortgage origination and servicing abuses; and 5) rehabilitate neighborhoods and reduce foreclosures.
As more information develops on the new plan, I will keep you informed as well!
No comments:
Post a Comment