New mortgage plan could help 900,000 borrowers

President Barack Obama recently announced a new plan to help underwater homeowners refinance their home loans in order to avoid foreclosure, no matter how much their homes have declined in value since the housing market crash. In addition, the Federal Housing Finance Agency said it would eliminate some refinancing fees and reduce others, as well as waive risk for certain lenders, to make refinancing a more affordable option.

Bloomberg reported that the new plan is an extension of the 2009 Home Affordable Refinance Program that aimed to help 5 million borrowers avoid default. However, that effort only reached 895,000 homeowners for refinancing as of August 2011. The FHFA predicts under the new extension, the number of loans to refinance could double by the end of 2013 to nearly 900,000 borrowers.

However, Meg Burns, senior associate director at the FHFA, told the news source that the majority of the nation's 11 million underwater borrowers will not be able to take advantage of the new program, as their loans were not sold to Fannie Mae or Freddie Mac before June 2009.

In addition, the Los Angeles Times reported that officials from the Federal Reserve are hinting at launching another program that would involve the central bank buying mortgage-backed bonds to help keep mortgage rates low.

"They keep trying to find something that's going to work so far they haven't found the silver bullet," Bert Ely, independent banking analyst, told the news source. "More moderate approaches haven't worked, so now they're trying something that frankly is more radical."

More News