Obama Refinance Plan Makes It Easier To Refinance Underwater Homes

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In an attempt to help more borrowers refinance their underwater home, President Obama has developed a plan to make it easier for homeowners to refinance their equity challenged home.  The plan is to help “responsible” homeowners who’s mortgage loans do not meet HARP guidelines refinance and  obtain lower interest rates.  The proposed Obama Refinance Plan is to save thousands of dollars for homeowners on their mortgage payment which will allow them to be in a more comfortable payment and perhaps spend more to help boost the economy.

Traditionally, homeowners could not refinance their home if the value was less than what was owed on their mortgage.  With the Obama Refinance Plan, the plan is to make it easier to refinance your underwater home.  Under the proposed plan, “responsible” homeowners will not need to qualify financially if the borrower has been making timely payments, closing costs and fees will be lowered and instead of trying to refinance though current lenders, borrowers can shop for competitive rates with other lenders.

Here are some of the highlights to the proposed Obama Refinance Plan:

  • Borrowers must be current on their mortgage for the past six months, with only one late payment within the last 12 months;
  • Credit score must be at least a 580 fico score or above;
  • Refinance is restricted to primary residence only;
  • Current mortgage loan must not be backed by the government, Fannie Mae or Freddie Mac;
  • Streamlined processing with no appraisal or tax return required and only verification of employment needed;
  • Closing costs will be paid by financial institutions when borrowers refinance into a 20 year mortgage term or shorter.

The proposed Obama Refinance Plan will require approval from Congress since the new mortgage will be insured by the Federal Housing Authority (FHA).  There is no telling whether this plan will pass, but you can guess that this will be an uphill battle to get approve.

Updates to the Obama Refinance Plan will be posted when new developments happen.




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