President Obama is pushing for Congress to help expand mortgage refinancing to millions of borrowers with loans not backed or owned by Fannie Mae and Freddie Mac – and those who cannot currently take advantage of historically low interest rates.
The president is to make a stop in Reno, Nevada to promote a program he outlined in his State of the Union address that the administration claims would enable eligible homeowners who are current on their mortgages to save $3,000 a year.
The cost of the new refinancing program would be offset through a fee on the largest financial institutions “based on their size and the riskiness of their activities,” the White House said.
“It won’t add a dime to the deficit,” an administration statement said.
Currently, an Obama Administration effort dubbed HARP (Home Affordable Refinance Program) has been revamped to cover borrowers who are deeply “underwater” on mortgages, or owe more than the values of their homes.
Now known as HARP 2.0, the program is open only to those with mortgages owned or guaranteed by Freddie Mac or Fannie Mae, the two government-sponsored enterprises that claim more than 60 percent of U.S. mortgages.
Regardless of what type of lender owns the mortgage, borrowers under Obama’s plan would apply “through a streamlined process designed to make it simpler and less expensive to refinance,” the White House said.
Any homeowner with a non-federally guaranteed loan who meets the following criteria would qualify for refinancing under this new program:
- No missed mortgage payments in the last six months, and no more than one missed payment in the six months before that
- A current FICO score of at least 580 (approximately nine in ten borrowers meet this requirement)
- The loan being refinanced is not worth more than area median home values, as determined by Federal Housing Administration conforming loan limits
- The loan being refinanced is for a single-family, owner-occupied principal residence (to be sure that the program benefits responsible homeowners trying to stay in their homes)