New Refinance ProgramDuring his State of the Union address, President Barack Obama announced a new refinance program, which would help “responsible” borrowers finding themselves in “underwater” situations to refinance their mortgages.  This could greatly benefit millions of homeowners, that is, as long as Congress allows the plan to pass on through, however at this point is up in the air.

The plan will go through the government’s mortgage insurer, the Federal Housing Administration (FHA).  Now of course this plan comes at a price, one that some may oppose in Congress.  It’s estimated to ring in anywhere between $5 billion and $10 billion.  Who or what would be responsible for covering these expenses though?  Well that would be a tax on the heads of major lenders.  Definitely something that will likely upset Congress.

There’s another problem that could rise from this program.  That is the FHA itself.  The Federal Housing Administration has had somewhat of a “rocky” past and people are claiming they don’t need to take any more risks as it is.  Another potential issue with the FHA is that some consider them to be in an “underwater” situation of their own.  They guarantee about $1 trillion in American mortgages but yet they only have $1.2 billion in cushion.

Officials have stated in regards to the above concerns that a separate fund could be completed for these loans.  It wouldn’t be considered a part of the Mutual Mortgage Insurance (MMI) fund.  This custom fund would be built to handle potentially high losses.

This plan could help a major amount of homeowners, about 3 million, on top of the 11 million homeowners that already qualify for the Home Affordable Refinance Program (HARP).  Obama’s plan faces a rough road before it can become a reality.  At this point it lies in the hands of Congress if it is to progress.  After Congress, borrowers and lenders must then come to a complete agreement on the requirements.  After all that is said and done, there is potential this could shake up Wall Street because hundreds of thousands of loans could then be paid off earlier than their term which is a fact that that bondholders surely don’t want to hear.

The outline of President Obama’s plan has been announced now it is a waiting game to see how it unfolds.  Stay up to date on this plan by checking back with this blog or even by asking questions regarding the program. Feel free to call 1-800-555-2098 or even fill out the email form below with questions on your scenario to see if you qualify for HARP mortgage.

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