Mortgage Refinance | Mixed Reviews For President Obama's Housing Plan

February 9, 2012 – 5:35 am

President Obama is calling for an end to the red tape that’s plagued homeowners looking to refinance, and big banks may be forced to foot the bill.

The new mortgage refinance plan the White House will send to Congress would cost the largest banks anywhere from $5 billion to $10 billion. The plan, known as the Blueprint for an America Built to Last , was first introduced in Obama’s State of the Union speech. Among other things, the plan would allow private-label mortgages — not guaranteed by government sponsored entities (GSEs) Fannie Mae and Freddie Mac — to refinance through the Federal Housing Administration (HUD).

The plan that will go to Congress will give every responsible homeowner in America the chance to save about $3,000 a year on their mortgage by refinancing at historically low rates.

“I want to be clear,” President Obama said in a speech at Falls Church, Va., on Wednesday, “This plan, like the other actions we’ve taken, will not help the neighbors down the street who bought a house they couldn’t afford, then walked away and left a foreclosed home behind.”

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“It’s not designed for those who’ve acted irresponsibly, but it can help those who’ve acted responsibly. It’s not going to help those who bought multiple homes just to speculate and flip the house and make a quick buck, but it can help those who’ve acted responsibly.”

“What this plan will do is help millions of responsible homeowners who make their payments on time but find themselves trapped under falling home values or wrapped up in red tape.”

To qualify, borrowers must have been current on their mortgage for the past six months and cannot have missed more than one payment in the past year.

HUD Secretary Shaun Donovan briefed the press on the full plan. Some key aspects include:

– Broad base refinancing to help responsible borrowers save an average of $3,000 per year

-The introduction of a homeowner bill of rights, designed to insure buyers and lenders are playing by the same rules

– A pilot sale of foreclosed properties to be transitioned into rental housing

– A full year of forbearance, provided by major banks and the GSE’s

– Pursuing a joint investigation into mortgage origination and servicing abuses

– Rehabilitating neighborhoods and reducing foreclosures, and expanding eligibility for HAMP

Frank Keating, President and CEO of the American Bankers Association , is less than thrilled. “The refinance proposal announced today, unfortunately, includes a tax on banks, which will directly reduce

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