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."
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