Federal refinance plan in the works for underwater borrowers?

It looks as if a federal plan is in the works to help underwater borrowers with mortgages not backed by Fannie Mae or Freddie Mac.  The proposal, outlined in President Obama’s State of the Union address, would help millions of homeowners in America.  Borrowers would need a minimum credit score of 580 to be eligible.  The following article is from Inman.com:

Last week, in his State of the Union address, President Obama introduced a proposal to help millions of homeowners, who are underwater on their mortgages, refinance their loans at current low rates. Today, the administration released details of the plan.

The plan, which must be approved by Congress before it can become active, would expand access to federal refinancing initiatives for holders of mortgages that are not currently backed by Fannie Mae or Freddie Mac.

“No more red tape, no more runaround from the banks,” the president said during the address, referring to the underwater mortgage assistance plan that his administration estimates could save qualified homeowners up to $3,000 a year by refinancing their loans.

The refinance initiative would be available to owners of single-family, owner-occupied homes who meet several basic “responsibility” criteria. The criteria include that qualified borrowers:

  • have been current on payments for the past six months and have not missed more than one payment in the previous six months;
  • have a FICO credit score of at least 580; and
  • have a loan not higher than Federal Housing Authority loan limits for the home’s geographic area.

…Other aspects of the plan include a proposed “Homeowner Bill of Rights,” which would encourage streamlined, simplified mortgage forms and limit the practice of “dual-tracking,” in which banks concurrently work on restructuring a loan and pursue a foreclosure for the same property at the same time.

“Before they can start foreclosure, banks will have to show they took all reasonable steps to modify a borrower’s mortgage,” wrote Robert Freedman in a Realtor Magazine article published today…

Read more of Inman’s article here online: “Obama administration details refinance plan for underwater borrowers.”

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