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Robert Longley

Obama Wants to Help 'Responsible' Homeowners

By February 8, 2012

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Activists Demonstrate In Support Of Homeowners Believe it or not, there were lots of Americans who, during those days of zany "everybody qualifies" borrowing that caused the great recession, bought houses they actually could afford and made their mortgage payments even in the face of falling home values, pay cuts and layoffs without just walking away from their homes. Well, President Obama says the time has finally come for the government to help those "responsible" homeowners.

In a February 4 address, Obama stated he would ask Congress to pass legislation streamlining the refinancing process, thus helping responsible homeowners save an average of $3,000 a year on their home loan payments.

We know what went wrong, the President told a nationwide radio audience. "Lenders sold loans to families who couldn't afford them," he said. "Banks packaged those mortgages up and traded them for phony profits. It drove up prices and created an unsustainable bubble that burst -- and left millions of families who did everything right in a world of hurt."

According to the President, the continued drop in home prices has left more than 10 million responsible homeowners "upside down" owing more on their mortgages than their homes could be sold for.

According to a White House Fact Sheet, the plan would allow homeowners with loans insured by Fannie Mae or Freddie Mac to access a new streamlined refinancing process to be administered by Fannie Mae and Freddie Mac. Borrowers with standard, non-jumbo loans not backed by Fannie Mae or Freddie Mac will have access to refinancing through a new program run through the Federal Housing Administration (FHA).

Also See: Who are Fannie Mae and Freddie Mac?

Borrowers with loans not insured by Fannie Mae or Freddie Mac could qualify for streamlined refinancing if they are making their payments on time, have a minimum credit score of 580 and have a loan that is no larger than the current FHA conforming loan limits in their area. In addition, refinancing will be limited to loans for single family, owner-occupied homes.

"I want to be clear: this plan will not help folks who bought a house they couldn't afford and then walked away from it," said President Obama. "It won't help folks who bought multiple houses just to turn around and sell them."

In addition to streamlined refinancing, Obama's plan proposes "Homeowner Bill of Rights" legislation requiring lenders to provide simple, easy to understand mortgage forms, require no hidden fees and provide individual assistance to at-risk homeowners.

"But here's the catch," concluded the President. " In order to lower mortgage payments for millions of Americans, we need Congress to act. They're the ones who have to pass this plan. And as anyone who has followed the news in the last six months can tell you, getting Congress to do anything these days is not an easy job."

Also See:
Congress Took it Really Easy Last Year
Feds Take Over Fannie Mae and Freddie Mac
When Did the Great Recession End?

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Photo by Justin Sullivan/Getty Images

Comments

February 8, 2012 at 9:20 am
(1) mike says:

I am trying to do an FHA streamline which currently exists. This program falls under some of the guidelines stated. I wonder what other things will be available if congress passes the legislation. Will they drop your loan to what your home is actually worth. If I owe 400,000.00 on my home but it is only worth 320.000.00 will they remove 80,000.00 from what I owe?

February 8, 2012 at 9:30 am
(2) Robert Longley says:

@ Mike: From the White House Fact sheet…

“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. This would reduce the risk associated with the program and relieve the strain of negative equity on the borrower.”

February 8, 2012 at 10:11 am
(3) mike says:

Robert thanks for the response

February 10, 2012 at 12:09 pm
(4) Jessica says:

Has this legislation passed? If so, what can homeowners do to get the process going? Do we work directly with our loan servicing company? If not, does anyone have any idea when it might?

February 10, 2012 at 4:26 pm
(5) usgovinfo says:

@Jessica — No the legislation hasn’t even been introduced in Congress yet. If the bill even passes, it will be later this summer.

February 15, 2012 at 3:30 pm
(6) Fred says:

… and what about VA streamline loan holders – will we qualify?

February 15, 2012 at 3:33 pm
(7) Fred says:

… also, thank you for your service, this is a great website.

February 26, 2012 at 5:09 pm
(8) j says:

It is about time consideration be given to those who have performed their legal responsibilities. Although we have been fortunate in retaining one income, our expendable income is depleted every day due to the rising costs of gasoline, food, etc. The costs involved in refinancing has made the process moot. Hope Congress can consider the needs of working class Americans soon, before there are none.

March 6, 2012 at 6:07 pm
(9) michelle says:

i currently owe more than twice what my home is worth. here is the catch and one I am having trouble finding a soluiton. I have a 1st, 2nd and small Heloc loan against my home. Each loan in itself is within the appraised value of the home, however, the total of all three is more than twice what the home is worth. Does anyone know of any program I can pursue which would offer a principal reduction of each of my loans , either separately or combining it into one loan closer to the appraised value. I took a large paycut last year and now cannot make the payments on all of these loans. Funny thing is, when i spoke to one of the lenders, they told me that a short sale might be my only option, where one lender would buy the loans from the other two at a fraction of what is owed and then assume the total of the loans which in essence would end up being closer to the appraised value. If they are willing to do that, then why not do that for the homeowner. Any solutions to my problem? I would appreciate any info anyone could pass on in regards to this. Thanks:)

June 23, 2012 at 4:18 pm
(10) M says:

Michelle, my situation is similar and I haven’t been able to get any help. Let me know if you get help somewhere. Thanks for sharing.

July 11, 2012 at 1:58 am
(11) MS says:

Amen to the comments made by j (8)!

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