Obama’s New Refinance Program for Responsible Homeowners

Posted by Madison on February 1, 2012

The Obama administration just announced details of the new home loan refinance program for responsible homeowners mentioned in the state of the union address.

The new refinance plan is supposed to save homeowners an average of $3,000 per year by helping homeowners take advantage of the current, low mortgage rates.

The new Obama refinance program will be for homeowners previously not covered by the making home affordable program: homeowners who are current on their payments, but can’t finance because they are underwater or have a loan not owned by Fannie Mae or Freddie Mac.

Responsible Homeowner Refinance Plan

Here are some of the highlights of the refinance plan from the fact sheet released by the White House:

The refinancing program will be open to all non-GSE 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.

In addition, borrowers won’t have to submit a new appraisal or tax returns. Eligibility will be based only on the banks confirming employment.

Underwater loans will be eligible, but the LTV doesn’t appear to be set yet:

The Administration will work with Congress to establish risk-mitigation measures which could include requiring lenders interested in refinancing deeply underwater loans (e.g. greater than 140 LTV) to write down the balance of these loans before they qualify.

Now the plan must get approval from Congress…





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Comments to Obama’s New Refinance Program for Responsible Homeowners

  1. what is a GSE? I have never been late on a payment and have a fico of 780 but am about 15000 underwater so never thought I could refinance. this would be great! and could i refi through my same credit union, they are offering like 4.031% right now?

    Suzanne

  2. “Now the plan must get approval from Congress…” — which means this article was a waste of time. It’s not going to happen.

    Rory Rohde

  3. I have a FANNIE Mae Loan with Bank of Am as my holder (was Countrywide) Value of home on Zillo and with Miami-Dade County Tax Agency is $57,000. I owe 98,000 at 7-1/2 25 yr 9 mo left. Bank America says Fannie Mae says my home is worth $97,000. (would like to sell it to them for that) so I can refinance but I need $4,000 to do that. Go Figure. I have auto pay on my mortgage and have never been late. So this program won’t be any different. Sounds good on paper but it can’t be done.

    Marilyn

  4. None of this matters if banks don’t actually offer them. I’d have been eligible for the previous programs, except no bank would actually participate in them. I ended up just investing in appraisals until I got a ridiculously high one, and closed at a traditional LTV instead. Whole lot of nothing going on here.

    Ethan

  5. Suzanne,

    GSE = Government Sponsored Entity, i.e. Fannie Mae and Freddie Mac. Corporations created by the government to provide financial services (credit) to a specific area of the economy.

    In theory, Fannie and Freddie were separate corporate entities, but in reality and practice, the US Government stepped in during the financial crisis and put taxpayer money into the corporations to keep them from going under. (And they are under conservatorship now.) Thus the phrase “private profits, socialized lossses”.

    So in talking about refinancing mortgages, you have two fundamental types: mortgages that are owned and/or guaranteed by the Fannie/Freddie (ie the US government) and privately held (non-GSE) mortgages.

    matthewd

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