Will Obama Refinance Your Mortgage?

Several media reports claim that one of the tools the Obama administration may use to resurrect the housing market and help mortgage holders remain in their homes is a program which will let people refinance at current mortgage rates. With rates at all-time lows, refinanced mortgages could save people hundreds, if not thousands of dollars a year.

The New York Times reports that "A wave of refinancing could be a strong stimulus to the economy, because it would lower consumers' mortgage bills right away and allow them to spend elsewhere." The paper also points out that some federal regulators may try to block such a move. The plan could also complicate the value of certain mortgage-related investments.

The program would face other hurdles. It's possible that financial firms, such as banks, might need new appraisals, a process which can take weeks. There is also the issue of whether the deal would only be extended to people with good credit ratings.

Despite multiple hurdles, the refinancing plan could be smart way to boost the housing market. Data from S&P/Case Shiller shows that the value of homes in the top 10 and top 20 markets continue to fall. RealtyTrac research demonstrates that foreclosures have dropped, but that once court cases involving these troubled mortgages have ended, the rush of foreclosures will rise. The market is also plagued by two million to three million homes which are in "shadow inventory." Most of these are foreclosed properties held by banks but that have not been put on the market yet.

The last government program which helped the housing markets was one that gave tax credits of up to $8,000 to buyers of new homes. That program expired in April 2010 and home price drops have since accelerated.

The other open question is whether people will indeed take savings from mortgage reductions and start to spend, which would help GDP. Americans are still concerned about unemployment and another recession. Many people who could refinance their homes might rather save the money from the move.

But, the administration knows that without a new plan, the housing trouble could continue for years. That alone will put a continued drag on the economy as people with underwater mortgages cling to homes worth less than their mortgages or simply default. A program like the one proposed may be the only way to build a foundation for a market which is still in free fall.

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Anthony

A good plan for all. Think past the right and left politics. Millions of homeowners are 100K to 250K upside down on their mortgage. Many by no fault of their own. They wanted to own a house and the majority put blood sweat and tears into their homes.

The smartest thing for those folks over 100K underwater should walkaway. This hurts all homeowners.

Move these folks to a new 3.5% mortgage with little cost to convert and guess what. They will not walk because they now have a really good rate which mitigates their negative equity.

They don't walk and YOUR house keeps its value. No brainier folks!

September 02 2011 at 8:04 PM Report abuse rate up rate down Reply
laboyga

How damn unfair can you get. So boy wonder (Obama) will reward people that made a stupid choose and bought inflated homes and aware that at some point, if mrkt drops, they might not be able to hold on later.........On the other hand you had millions make smart decisions and now they all get the short end.......... You know only way banks will go along is if another bank bail out happens. So you can say I/We bail out every Mofo that made lame ass chocie. some of you will come back with a stupid remark, like I lost my job and its not my fault. Well I lost mine also, so dont even try and you loosing a home shouldnt be everyones problem in this world. Learn to manage your own damn life good or bad. Trust me, mine is as bad as it can get but I dont like to throw my **** on other people and just say my problem, I know, but I am gonna make sure it becomes everyones problem........

August 29 2011 at 9:23 PM Report abuse rate up rate down Reply
theycallmeroy2

Something to keep in mind. Pulling a deal off like this would require banks to go along with the deal. Now, what could the Government offer the banks? Perhaps make all litigation lawsuits go away? Bond holders would take a hosing. Plus, if one doesn't have a job, does it even matter how low their rates are?
We've heard a lot about, 'underwater mortgages.' The issues isn't the first mortgage, the trouble lies on the second and third mortgage. Finally, the thought is- it would free up the homeowner to spend elsewhere, thus raising the GDP. Sounds nice, but if one has struggled to make a payment and had to borrow, plead to do so, which may include being nice to people they ordinary wouldn't allow in their yard, watched their savings go out the door, and had nasty looks shot to them by their children, " I have to go without lunch again?" The last thing they should be doing is out and about spending money. A refi- is a default. It's changing the original agreement, no matter how one (spins) spends it. The bottom line is what and who has to be greased to do it.
When one plays with pigs, one gets dirty.

August 26 2011 at 6:02 PM Report abuse rate up rate down Reply
kaywheel

wHEN most of the U.S. homes are underwater(more owed than worth) -- an idea for refinancing is oxymoron because no appraisal would make sense. Who is advising obama? His modification program bordered on incompetence-- with exhaustive paperwork and leaving it up to the "mercy" of the banks to help out homeowners. What planet is he living on? Or, is it just lack of experience and savvy of how the real world works to the max. You would have thought that there would have been one advisor around that could make sense of anything. Most likely this incompetence will cost him re-election. Roosevelt-- to help keep the housing marker from c rashing formed a special National Mortgage Relief program . Obama needs to borrow a page from Roosevelt's handbook.

August 26 2011 at 6:01 PM Report abuse rate up rate down Reply
Charles

Let the banks solve the problem. The banks rushed to wright loans on houses to MAKE MONEY. They messed up the paper work and can't find it now. I'm sorry! They act as if the home owner is a loser. A refi at low interest level would clean up the books for the banks. The media would have a hay day because the banks would want more money to clean up their books. What are we doing? For suffering American's this will not be a bail out, it will be the nail that closes the coffin.

August 26 2011 at 5:39 PM Report abuse rate up rate down Reply
larry

NO MORE BAILOUTS. The responsible taxpayer cannot afford any more bailouts. I have owned several homes, have had to qualify for my mortgage loans and show my income that I could aford to pay my bills. Countrywide loans gave loans to people that didn't have a dime in their pocket but signed on the "X". Now that some have lost jobs, they lost their houses and I have to pay for their losses, the bailouts and my home. If a bank can't make it----let it fail. Bank of America paid out million dollar CEO bonusses with their bailouts. They got two trips to the TAXPAYER TROUGH and in my opinion, blew it by paying bonuses, buying other banks, not learning anything from their failures, rewarding their CEO's for running the bank into the ground and now they want another bailout ??? NO WAY---------------------------------------Let them fail.

August 26 2011 at 4:48 PM Report abuse +1 rate up rate down Reply
mk23666

They should have done this in the first place. Instead of bailing out the banks they should have bailed out the homeowners who got shafted by the banks.

August 26 2011 at 4:40 PM Report abuse +1 rate up rate down Reply
sf1000000

If the President wants to do something then force the banks to cut the balance on the amount home owners owe. In other words a CRAM DOWN. Commercial lenders have done it why won't they do it for Residential mortgages?
Forget my spending any more money on anything that is NOT essential..Santa Clause is NOT coming to my house..this Xmas..

August 26 2011 at 4:09 PM Report abuse +1 rate up rate down Reply
steveandsusie

Just another Bank Bail-out to slip past the Americans that actually pay tax. Bank of America stock was falling so Obama and his elite staff, decide to bail them out again. Think about it, Bank of America, Wells Fargo, Freddie and Fannie hold over 90 percent of the notes. If the government does some type of Guaranteed bailout on distresses, and now over mortgaged property, the two biggest banks profit again will get even bigger. Thats why Buffet just put 5 billion into Bank of America stock today, because you can bet Berkshire has inside information from Obamas boy's their gonna do something. Neither of the two big banks are hurting, if they were BA would not have purchased Country Wide and Wells Fargo would not have purchased Wachovia. All a bunch of Smoke and Mirrors designed to rob the tax revenue again. If they would just leave the economy alone, encourage companies not to look for a piece of paper that says this person attended x amount of years of college and just look at the person to see if they can quickly learn the specific job or encourage the companys by tax incentives to hire and specificly train for the exact job, we can start producing some durable goods in this country again. Also people taking out the trash, and digging the ditches really should be paid a decent wage because they are going to become so rare that we will just end up a country of a bunch of fat asses sitting on the computers complaining about our screwed up country. We need to get some production going, be wary of EPA restrictions because we are the only country in the world that plays by those green house rules why the others are passing us by leaps and bounds. Our children are becoming the dumbest and most lazy the world has ever seen. Get rid of these phones in schools and get them back on track with some work ethic and production. Schools count for over half of every local budget and were not getting any good results for the amount of money their ******* up. Sorry about the excessive ramble, just can't stand seeing what's happening to us and no one wanting to talk about the elephant in the room.

August 26 2011 at 3:45 PM Report abuse +2 rate up rate down Reply
1 reply to steveandsusie's comment
theycallmeroy2

A bit reaching on the Berkshire deal. Five billion is a drop in the bucket to BOA. But it's admirable you have an interest in the deal. Might require some read up on the details. Cool.

August 26 2011 at 4:22 PM Report abuse +2 rate up rate down Reply
Fed up Senior

Unfortunately, this latest scheme will do nothing to address the "shadow inventory." When these 2-3 million houses start hitting the market, it will continue to be depressed by these foreclosures. Additionally, it does not address the fact that people who owe a lot more than the house is worth will simply default and walk away. You are now adding to the foreclosure inventory. Unfortunately, there is no real solution unless the government is going to let people refi at the current rates AND suck up the difference between the current mortgage and the market value. If the government does that, what happens if and when the market rebounds? Will the people have to repay the difference when they sell? Who administrates this half assed program? Oh, right, another new Czar with a staff of thousands? I hate to say it, but the government needs to butt out and let the market find its own level.

August 26 2011 at 3:43 PM Report abuse rate up rate down Reply
1 reply to Fed up Senior's comment
theycallmeroy2

Dang Fed up Senior, Great Post! And throwing in shadow inventory? Somebody's been doing their homework.

August 26 2011 at 4:07 PM Report abuse rate up rate down Reply