White house yesterday released the details of $75 Billion Homeowner Affordability and Stability Plan. Here’s a Washington Post article with the details:
1. Affordability: Provide Access to Low-Cost Refinancing for Responsible Homeowners Suffering From Falling Home Prices
* Enabling Up to 4 to 5 Million Responsible Homeowners to Refinance: Mortgage rates are currently at historically low levels, providing homeowners with the opportunity to reduce their monthly payments by refinancing. But under current rules, most families who owe more than 80 percent of the value of their homes have a difficult time refinancing. Yet millions of responsible homeowners who put money down and made their mortgage payments on time have — through no fault of their own — seen the value of their homes drop low enough to make them unable to access these lower rates. As a result, the Obama Administration is announcing a new program that will help as many as 4 to 5 million responsible homeowners who took out conforming loans owned or guaranteed by Fannie Mae or Freddie Mac to refinance through those two institutions.
* Reducing Monthly Payments: For many families, a low-cost refinancing could reduce mortgage payments by thousands of dollars per year:
* Consider a family that took out a 30-year fixed rate mortgage of $207,000 with an interest rate of 6.50% on a house worth $260,000 at the time. Today, that family has about $200,000 remaining on their mortgage, but the value of that home has fallen 15 percent to $221,000 — making them ineligible for today’s low interest rates that now generally require the borrower to have 20 percent home equity. Under this refinancing plan, that family could refinance to a rate near 5.16% — reducing their annual payments by over $2,300.
2. Stability: Create A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners
* Helping Hard-Pressed Homeowners Stay in their Homes: This initiative is intended to reach millions of responsible homeowners who are struggling to afford their mortgage payments because of the current recession, yet cannot sell their homes because prices have fallen so significantly. Millions of hard-working families have seen their mortgage payments rise to 40 or even 50 percent of their monthly income — particularly those who received subprime and exotic loans with exploding terms and hidden fees. The Homeowner Stability Initiative helps those who commit to make reasonable monthly mortgage payments to stay in their homes — providing families with security and neighborhoods with stability.
* No Aid for Speculators: This initiative will go solely to helping homeowners who commit to make payments to stay in their home ¿ it will not aid speculators or house flippers[Homeowner Affordability and Stability Plan – Obama Administration’s Home Mortgage Crisis Fact Sheet].
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