Obama's Refinance Plan to Cost Taxpayers Up to $10 Billion
Yesterday, Obama made one more plea to Congress in his efforts to help “responsible” but struggling homeowners lower their monthly mortgage payments.
It's a controversial issue, as many oppose the plan believing that it is too similar to the “stimulus-era idea” that essentially hurt taxpayers and left them in a billion-dollar-deep hole.
Presently, millions of homeowners are struggling to refinance on houses that are worth less than what they owe.
Housing prices haven't dipped this low since 2003...
If legislation passes, homeowners who are making payments on time will be able to take advantage of the today's extremely low interest rates with the possibility of saving thousands of dollars each year.
Those who would qualify for this refinance program must be up-to-date with their mortgage and have a minimum credit score of 580 (a rather low rating according to experts).
According to the Washington Post:
To help the economy get more of a boost from low interest rates, Obama proposed that almost anyone who has a credit score above 580 and has been paying his or her monthly mortgage bill on time for the past six months be able to refinance. It wouldn’t matter under Obama’s proposal whether borrowers had government-backed mortgages or loans owned by banks and other private investors.
The only major limitation to the program would be on borrowers who own very expensive properties, relative to where they live. The maximums range from $271,050 to $729,750. A new program run by the Federal Housing Administration would be set up to refinance mortgages that are not backed by federal mortgage giants Fannie Mae or Freddie Mac.
On the other hand, Republican presidential nominee front-runner Mitt Romney is calling for a “hands-off” tactic in tackling America's foreclosure dilemma.
Agreeing with Romney, House Speak John A. Boehner argues that the last four government programs intended to help homeowners pay their mortgages more feasibly have failed. If one tries something that does not succeed, it's a common principle that one should try a different approach if one doesn't wish to fail...for a fourth time.
Instead of spending the time and effort on this program, other policy makers believe the President should focus on reforming the welfare system and creating jobs. That economic stimulus option takes out many of the risk factors associated with the refinance program.+7
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