In an effort to assist homeowners saddled with negative equity, the Obama Administration announced it will renew efforts to implement a more widespread refinance program for struggling borrowers.
In his most recent State of the Union Address, President Barack Obama said he wants to help the estimated 11.4 million borrowers upside down on their home loans. Since then, there have been a number of proposals introduced that may be able to accomplish this initiative.
"The housing market is beginning to pick back up," President Barack Obama recently said, according to HousingWire. "But there are a lot of people underwater."
The first initiative, spearheaded by Senator Jeff Merkley, would allow Fannie Mae and Freddie Mac to cover the closing costs of borrowers restructuring the terms of their loans through the Home Affordable Refinance Program. Many underwater households already utilize the option, but this change could open the door for even more activity.
Meanwhile, a bill introduced by Senator Dianne Feinstein would provide refinancing assistance for borrowers with loans backed by the Federal Housing Administration. In addition, Feinstein proposed setting aside $6 billion in funds so the agency can insure even more mortgages in the near future.
President has a plan of his own
President Obama specifically called for the reduction of the annual mortgage payments of underwater borrowers by an average $3,000. He claims these savings would not only help struggling homeowners, but could also boost the economy, since consumers will have more available funds to put toward other expenses.
"That's a big deal," President Obama added, according to the news source. "That $3,000 can strengthen equity in the home. Or that's $3,000 they can spend for a new computer for their kid to go back to school."
The President said priority would be given to borrowers who remained current on their monthly mortgage payments in the wake of the housing market collapse and economic recession.
Initiatives met with resistance
Even though these proposals appear to be in the best interest of Americans, they have drawn criticism from lawmakers on the opposite side of the political aisle. However, if lawmakers don't come to an agreement on the future of the federal budget, the money used to support housing initiatives could no longer be available, which could negatively impact the real estate industry recovery.