President Obama recently announced new measures to help borrowers refinance their existing mortgages to new loans with lower interest rates and cheaper monthly payments.
The plan is an expansion of an existing program to help borrowers who are not behind on their payments but cannot refinance because they do not enough equity in their home. Or they might be underwater–which means they owe more than their home is worth.
“Right now, some underwater homeowners have no choice but to refinance with their original lender – which some lenders refuse to do,” Obama said in prepared remarks.
“These changes will encourage other lenders to compete for their business by offering better terms and rates, and eligible homeowners to shop around for the best ones,” he added.
But how many homeowners will it really help? And will it be enough to jumpstart the still struggling housing market?
This program could be a big help to those borrowers, but probably not enough to make much of a difference in the overall economy, he added.
Despite the relatively modest effect, Mr. Obama and his team recognize the president needs to be seen on television everyday as someone trying to solve problems.
If Obama can’t get a resolution passed through Congress, he has to move ahead with incremental measures that help pockets of Americans.
The plan will mostly help borrowers who owe less than their mortgage, despite the repeated talked from White House officials that it is aimed at so-called “underwater” borrowers.
Close to a million borrowers have gotten a HARP refinance loan since it was introduced two years ago, but only about 100,000 of them were borrowers who owed more than their house is worth. Without the HARP program, borrowers would have to owe less than 80 percent of the loan’s value to refinance, so the majority of borrowers who got new HARP loans were in that 80 to 100 percent range.
Time will tell how many homeowners will actually be able to take advantage of this new program. Contact Us if you would like to review your options.