Obama Refinance Plan

Obama Refinance Plan
Daniel Cohen
Feb 1, 2012
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    3 min read
Key Takeaways:
  • 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
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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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10 Comments

KKS, May, 2014
Is there ANY program out there to help with a high rate 2nd mortgage when the home is still underwater?? I've tried dozens of lenders, HARP, even Obama's Home Help organization. Nothing. Any ideas are so appreciated.
AAnna, Feb, 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!!!
BBill, Feb, 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.

PPatrick, Feb, 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.
PPatrick, Dec, 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.
BBill, Dec, 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.