Obama proposes new mortgage refinance program

Chairman of the Federal Reserve Ben Bernanke recently called upon Congress and the Obama administration to create new programs to offer more stimulus efforts to help boost the U.S. housing market and overall economy. In response, President Obama proposed a plan to help borrowers reduce their monthly mortgage payments and avoid foreclosure.

During the State of the Union Address, the president said he will send Congress legislation that would allow homeowners to take advantage of the record-low mortgage rates and modify their existing home loans as well as increase the number of buyers able to acquire a new mortgage. The president estimates the average borrower could save $3,000 a year under the new program, Bloomberg reported.

Currently, the mortgage rates are below 4 percent and home prices are 32 percent below their 2006 peak, making homeownership very affordable. But mortgage lenders have imposed stringent requirements on borrowers and buyers looking to refinance or obtain a mortgage. Thus, many homeowners are unable to refinance and could face foreclosure, which would further hinder the recovery of the housing market, the source reported.

Under the new program, large financial institutions will cover associated costs of the program, and the initiative will apply to all borrowers, whether or not their loans are government-backed.

When discussing the program in his address, President Obama said efforts have to be made to encourage responsible borrowing as well as fair lending practices, Politico reports.

More News