Obama Refinance Plan

President Obama
  • Obama refinance plan helps more borrowers qualify for low-interest loans.
  • Mortgage borrowers who do not have Fannie or Freddie loans will be eligible.
  • The Obama Refinance Plan requires Congressional approval to become law.

Obama Refinance Plan Proposes Mortgage Help to Millions of Borrowers

Editor’s Note: As of late 2012, the Obama Refinance Plan has not been passed into law. Various proposals have been made, in Congress and by the President to expand the refinance opportunities for borrowers who’ve been shut out of the market so far. Read the Bills.com resources HARP 3 and #myrefi, to learn more.

The new Obama refinance plan is designed to assist responsible homeowners who have been unable to refinance at today’s historically low interest rates. This mass refinance plan is intended to help millions of Americans benefit from low interest rates and consequently get lower monthly payments.

The Obama refinance plan will help qualifying borrowers save hundreds of dollars a month and stimulate the struggling housing market and the economy in general.

Following up on plans the President hinted at in his State of the Union address, as well as the HARP 2.0 mortgage program announced late in 2011 and the expansion of the HAMP program announced in January 2012, the new Obama refinance plan is a “broad based refinancing to help responsible borrowers save an average of $3,000 per year.” You meet Obama’s definition of a “responsible borrower” if you are:

  • Current on your mortgage payments for the past six months, with only one mortgage late in the past 12 months
  • Have a minimum credit score of 580, which is far lower than required for a conventional loan
Quick tip Contact one of Bills.com’s pre-screened mortgage providers for a free, no-hassle mortgage quote.

Other requirements include:

  • Restricting loans to borrowers refinancing their primary residence
  • Having a loan that fits with FHA loan limits for the county. FHA maximum loan limits range from $271,050 to $729,750, depending on where your home is located.

Not Just Fannie or Freddie

The new Obama Refinance Federal plan expands the pool of eligible borrowers to loans that are not currently backed by the government or by either Fannie Mae or Freddie Mac. The HARP mortgage program is restricted to loans backed by Fannie or Freddie, so the new Obama refinance program will reach millions of borrowers who have been shut out of the market.

Streamlined Process

In addition to offering the chance to refinance at low rates, the new Obama refinance program aims to streamline the mortgage process for qualifying borrowers. The goal is to make it easier and cheaper for borrowers and lenders to refinance. Key provisions include:

  • No appraisal required
  • No tax returns required
  • Only verification of employment for employed borrowers

Build Equity and Have Your Closing Costs Paid For

To encourage borrowers to use the savings that refinancing will bring to build equity, the new Obama refinance plan will pay your closing costs on the loan, resulting in zero closing costs, if you refinance into a loan with a term no longer than 20 years and "with monthly payments roughly equal to those" on your current loan. President Obama estimates that this provision will save an average of “about $3,000 per homeowner.”

Financial Institutions Pay the Costs

President Obama estimates that the costs of the Obama refinancing plan will range between $5 billion and $10 billion. The costs will be covered from the newly proposed Financial Crisis Responsibility Fee that is charged to the largest financial institutions in the country, without increasing the Federal deficit by even “a dime.”

Sticking Points

The Obama refinance plan can’t be imposed by presidential order. To become law, Congress must pass the President’s proposals. President Obama aims to build grass-roots support for his proposals and put pressure on Congress to offer relief to homeowners. Given the divisions that exist in Washington, the Obama refinance plan faces plenty of opposition from Congress. The plan will also likely face opposition from lenders and the financial institutions being asked to pay for it.

Bills.com will continue to report this story as more facts emerge, so return here for updates.

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Comments (68)

Anna O.
February 12, 2013
Finally!!!! I am a real estate appraiser and have been in the business for over 10 years. I, too, bought my house at the peak of the market and we are now underwater in our mortgage. We have faithfully paid our mortgage on time for 7 years, even though it went up $300 per month. I cannot tell you how important it is, not just for my family's sake, but for many many others for this bill to go into place. How can we petition congress to act? Are there already petitions available thru Facebook, email, or twitter that we can start circulating????? Please let me know!!!
February 13, 2013
A first place to start is to contact your federal representatives, your congressperson and senators. Let them know what you want them to do.

The White House Web site has an area where you can show your support for President Obama's #myrefi proposal.
Patrick M.
Tigard, OR  |  February 16, 2013
This obviously has no chance to pass. When Obama mentioned it during his state of the union speech not one Republican rose to their feet while the Democrats were all in favor. I e-mailed every Republican congressman regarding this act and no one responded. Our government is responsible for the banking mess, yet they won't help the people they hurt.
Patrick M.
Tigard, OR  |  December 02, 2012
It sounds like the financial cliff proposal Obama is trying to get signed off on includes a 50 billion stimulus that has a significant refinancing package in it. Has anyone heard anything about this? Also I was told by my mortgage lender any package introduced will not cover jumbo loans. I have followed this closely and I have not seen any evidence of that. The harp 3 is suppose to cover FHA loan amounts which are upto 750k. Anyone know anything about this also. I need something to happen soon, our lender told us we need to bring 125k to the table to refinance.
December 03, 2012
Patrick, there are lots of rumors as to what may happen, but I have not seen a specific refinancing package proposal that is tied to the fiscal cliff negotiations. There are various proposals such as the Boxer-Menendez Bill that may make the HARP 2 mortgage available to more borrowers.

The HARP 2 program allows a borrower up to the conforming loan limits. The new regulations allow for the limits to be set based on the time the loan was originated. This includes the higher limits set for the High Cost Areas during the period between 7/1/2007 and 9/30/2001. Check with your lender to see if your loan qualifies for the HARP 2 mortgage program and if you qualify for a larger sum.
Amber S.
Covington, GA  |  November 09, 2012
Any update to this since Obama was re elected? I have a 30 yr conventional at 6 %. Never been late or behind but, I am not backed by Fannie or Freddie. I am 80K underwater. I have perfect credit but can't get a refi. Suntrust won't modify me because I have never been late and haven't lost any income. I can rent a house for cheaper than what I am paying. I can't take any equity out to do repairs. I really hope this HARP 3.0 will pass. I feel like just walking away from my home!!!!!!!!
November 09, 2012
There is nothing new, yet, regarding HARP 3.0. Your best bet is to keep your eyes on the news, to see what develops, and to continue making your mortgage payment on time (as any program that is released will likely require a solid mortgage payment history).

It could be worth considering a strategic default, if your current loan is a non-recourse loan and the damage to your credit would be worth taking in exchange for getting out from underneath the underwater property. If your state's anti-deficiency laws permit the lender to come after you for a deficienct balance, a strategic default is far less attractive an option.
Amber S.
Covington, GA  |  November 15, 2012
I live in Georgia. Am I in a non-recourse state? What is a strategic default? Is it better to do a deed-in-lieu? Is that less damaging to your credit?
November 15, 2012
I have five reading assignments for you that will answer your questions:

Please ask any follow-up questions you may have on the most appropriate page.

Patrick M.
Portland, OR  |  November 09, 2012
Any word on what might be happening with the new refinance legislation now the election is over? We have tried for a year now with Bank of America to refinance under the mortgage settlement act. They might be the most awful company to deal with in the known universe.
November 09, 2012
No news, so far. It appears that the initial focus, post-election, is going to be on the fiscal cliff. However, you should keep your eyes on the news. Also, continue to check back at Bills.com, as we will certainly report on any expansion in the mortgage loan programs.
Patrick M.
Tigard, OR  |  September 13, 2012
Any talk of this third stimulus that was enacted today of helping out the underwater homeowners?
September 17, 2012
The main point seems to be that the stimulus is a further attempt by the Fed to bolster the US economy. The third stimulus aims to lower interest rates, encourage spending and investment. The hope is that lower mortgage rates may increase the value of homes and increase refinancing.

The stimulus plan has no direct impact on underwater borrowers. Indirectly, if the economy improves and home prices rise, then people with an underwater equity position will see their situation also improve and have increased opportunities to refinance.

Separately, there may be additional legislation that is aimed at borrowers whose mortgages are not backed by Fannie Mae, Freddie Mac, the FHA, or the VA.
Michael R.
South Mills, NC  |  August 30, 2012
I am totally frustrated with our banking system. I have been trying to refi for several years only to hear, "Sorry, we can't help, but look here or talk to this bank," only to be turned down at every turn. I pay all my bills on time and have a good credit rating. Unfortunately, my mortgage is not backed by either Fannie or Freddie. I am tired of being told no just because I do what I am supposed to do. I pay almost 2500.00 each month for my house and equity loan. I am at 100% LTV or a bit higher. How is someone like me supposed to refi? These banks are full of themselves.
August 31, 2012
Right now, there are no programs that can help you, though there is talk of an expanded HARP 3.0 program that would be available to non-Freddie & Fannie borrowers.
Ann B.
Hodgkins, IL  |  August 15, 2012
I applied for refinance under HARP 2.0 two months ago and was denied due to bankruptcy discharged in July 2010. My home was not reaffirmed in banckruptcy, but I plan on keeping the home and I have continued to make payments on time. However, the mortgage is an ARM and altho currently it's at a low interest rate, I would like to get a fixed rate because it may increase in the future. Will the new HARP 3 or what are my options for refinancing for a conventional loan? My credit score is obviously bad due to the bankruptcy.
August 16, 2012
There are lots of plans being offered, both by the President and by members of Congress, but nothing is law yet. I have not seen specific proposals that address your concern, so far, but you should keep your eyes on the news, to monitor developments.

HARP 2.0 technically removed the BK waiting period, but only if you work with your current lender through a manually underwritten loan. Try applying with your current lender and requesting a manual underwritten file.
Patrick M.
Tigard, OR  |  August 11, 2012
I read an article from August 8th that Mitt Rommeys advisor strongly supports Obamas refinance plan and it is going to vote in Sept. Anyone have any other information on this?
August 13, 2012
The articles I read stated that Glenn Hubbard, the dean of Columbia Business School and Romney adviser, does support expanding refinancing of government backed loans, but only supports some of the Obama Refinance Plan. It is not clear, from what I've read, if/when any proposals will come to a vote.
Betty M.
Tarzana, CA  |  July 11, 2012
When will this get into Congress? We are $90k underwater and not Fannie Mae nor FHA. We each have 800+ credit scores and there is not one bank or program that will even talk to us. Wells Fargo is the worst servicer too....we need help
July 12, 2012
Only time will tell if action is forthcoming. There is pressure to do something, but, as we know, getting different sides to reach a political compromise is not simple. All you can do is keep following the news. Perhaps there will be some interesting news that comes out of US Housing Secretary Shaun Donovan's online discussion today, July 12th, at 3:15 PM EDT. He is set to discuss current and proposed refinancing options. You can view the discussion at the White House Web site.
Melanie M.
Kaaawa, HI  |  June 18, 2012
What about those of us that own a rental property that is underwater? I have a negative income of $800 a month and Wells Fargo is the current mortgage holder. We have never had a late payment on anything, my husband is a veteran, but Wells won't help us. I would do a short sale but I don't want the blow on our credit. Do I have any options?
June 19, 2012
Rental properties are eligible for HARP loans. If your rental property mortgage is backed by either Fannie Mae or Freddie Mac, then you may be able to do a HARP loan. You can go online to see if you have a Fannie Mae or Freddie Mac loan.

However, even if you can lower your interest rate and reduce your monthly payment with a HARP loan, you may not improve your cash-flow enough to cover your $800 monthly shortfall. If you can't right your ship by refinancing and adjusting your other living expenses, a short sale may be a reasonable option. I understand your desire to maintain good credit, but if you aren't able to pay your bills, your credit will suffer, short sale or not. If your primary residence situation is stable, then the negative impact on your credit from the short sale is less important. It may also be worthwhile to consult with a bankruptcy attorney, to see if that option would provide the best solution available.
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