On February 1st President Obama announced a new program to help homeowners with underwater mortgages. The program is designed to let these homeowners refinance their mortgages at the current lower rates, reducing their monthly payments. The goal is to put more money into their pockets and while hopefully giving the economy a boost.
But it looks like the program will have a tough road. It will cost up to $10 billion and he proposed that a tax on the biggest banks would pay for it. I can’t imagine Republicans supporting that type of thing.
Here’s Some Details About The Program
The issue is that most homeowners with “underwater” mortgages don’t qualify for refinancing because they don’t have the required equity the lenders want. “If you’re ineligible for refinancing just because you’re underwater on your mortgage through no fault of your own, this plan changes that,” Obama said during a speech in a Washington suburb. “You will be able to refinance at a lower rate. You’ll be able to save hundreds of dollars that you can put back into you pocket.”
The program is only for responsible homeowners who are current with their payments and don’t have loans they never should have gotten in the first place because they overreached and bought more than they could really afford.
The fact is, there are millions of homeowners who bought in the last five years but now find their homes worth less than what they paid. They can’t take advantage of the historically low interest rates available now. It’s a Catch 22 situation for them. This program is designed to help them get into a better financial situation.
You could even argue that this will lower the number of foreclosures and folks abandoning mortgages that put them behind the eightball. It could really be an economy booster. Plus it could create jobs for folks in the mortgage industry. Not to mention avoiding a drain on taxpayers if underwater mortgage holders decide to abandon their homes.
But in today’s highly charged political climate, this program faces a real uphill battle to passage. I guess we’ll see how it all works out. Come back to see the story as it evolves.