President Barack Obama proposed a plan aimed at helping millions of homeowners refinance their mortgages to today’s historically-low rates. To pay for it though, he’ll need $5 billion to $10 billion. The plan would allow borrowers who are current on their loan to save thousands of dollars by refinancing into loans backed by the Federal Housing Administration, according to the U.S. Department of Housing and Urban Development. To pay for it, Obama is proposing to impose a fee on large banks — a move that likely won’t get past Congress, which must approve the measure. What’s different about the new proposal is that it would help borrowers with private bank loans who could not obtain new, refinanced loans in the past because they owed more on their mortgages than their homes were worth. “If you’re underwater through no fault of your own and can’t refinance, this plan changes that,” Obama said in a speech in Falls Church, VA.
To be eligible for the new refinancing program, borrowers must not have missed a payment for at least six months and have no more than one late payment in the six months prior to that. They also must have a credit score of 580 or better, a threshold that the administration says 9 out of 10 borrowers meet. Their mortgage balance also cannot exceed the loan limits for FHA-insured loans in their communities, which range from $271,050 in low housing cost areas to $729,250 in high-cost ones. They also must own and occupy the home covered by the loan.