In his State of the Union Address, President Obama laid out a plan to help responsible borrowers and support a housing market recovery. Details of that plan were released yesterday. However, funding for the proposed program must be approved by Congress, lowering the possibility that it will be implemented quickly.
Making sense of the story
- Operated by the Federal Housing Administration, the plan would allow underwater homeowners to refinance into cheaper federally insured loans. Borrowers with good credit who are current on their loan payments are eligible.
- The measure also streamlines the process of refinancing an underwater mortgage, eliminating the need for an appraisal or submitting a new tax return.
- To qualify, borrowers must be current on their mortgage, have a minimum credit score of 580, and must be refinancing a loan on a single-family owner-occupied principal residence.
- Lenders only need to confirm that the borrower is employed. Loans that are more than 140 percent of the home value probably would not qualify until banks wrote down part of the balance.
- Congress must approve $5 billion to $10 billion in funding, leading housing experts to praise the plan’s objectives with skepticism of it passing this year.