October 24th, 2011
10:42 AM ET
The Obama administration’s latest attempt to help the housing market targets homeowners whose credit is solid, who are up to date on their mortgage payments, but can’t refinance because they own homes in areas where the market has plummeted and their homes are underwater.
So he's announcing his plan in Nevada. A key state the President must win in 2012 – and bottom there has fallen out of the housing market. Since the peak of the housing market home prices fell 53%. In the Vegas metro area they fell by 59%. This official says there’s been virtually no refinancing activity for underwater borrowers in the area and this is designed to change that dynamic.
Today the President will announce a series of changes to ease up on responsible current borrowers so they can take advantage of today’s better mortgage rates. Under the new rules a homeowner with good credit who has missed one payment in a year can still qualify as a responsible current borrower.
The administration official advises that these homeowners will no longer be required to get an appraisal, they won’t need a new full credit check. The official explains, if you’ve been current your lender already owns the risk. They’ll also do away ‘risk based fees’ currently assessed on homeowners who have bad credit which increases the benefit of a refinance and eliminates the hassle factor.
The official tells CNN the administration has been working this issue with the banks and FHFA to get coordinated. Next, the FHFA will consider the proper guidelines and announce them to banks November 15th. Homeowners will be able to apply for the refinancing sometime after the 15th.
Between now and the 15th the FHFA could also decide to include another group of homeowners in this package. They could extend these changes to homeowners who have equity in their homes, are current on their payments but have bad credit scores.
One government official advises there are other ongoing plans to address larger housing issues that impact the overall market which will be announced down the line.
As a reminder recall the administration already announced up to one year forbearance for homeowners who lose their job you lose your job – you can defer mortgage payments when unemployed.
On the college loan piece on Wednesday the administration will unveil a plan to ease the burden on recent graduates who are paying down student loans. They can do this unilaterally through the Student Aid and Fiscal Responsibility Act, passed as part of the health care law.