RATE.com is your #1 source to find the lowest mortgage rates from the nation's top lenders. All rates shown are in real time. Research, compare and find the lowest rate with RATE.com!
Government May Back Mortgage Refinancing For Millions Of Americans
Recognizing that the struggling economy won't improve without a corresponding improvement in the real estate market, President Obama and his team of economic and real estate advisors are considering allowing homeowners to refinance their loans at current mortgage rates. The affected homeowners would be those whose mortgages are backed by Fannie Mae and Freddie Mac.
Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are two of the biggest participants in the home loan industry. They typically buy loans from banks to sell as investment securities, thereby freeing up the banks' money for additional loans.
Fannie Mae, founded in 1938 during the Great Depression, and Freddie Mac, founded in 1970, are government sponsored enterprises, using government money to back their securities. Together they back about $2.4 trillion in home loans with mortgage rates higher than 4%. Both were taken over by the government in 2008.
About 20 percent of homeowners currently owe more than their homes are worth, an estimated $700 billion. Many homeowners can't refinance their loans because the value of their homes has fallen or their credit score has fallen. In order for any plan to work, that is the market that must be helped first. A mortgage refinancing program could save those homeowners as much as $85 billion. Opposition could come from the regulator overseeing Fannie Mae and Freddie Mac, as well as investors who bought government-backed mortgage bonds.
Any plan must also stimulate the economy and cost the government little or nothing. A successful plan could provide a strong and immediate economic stimulus since it would allow homeowners to remain in their homes, would free up homeowners' money to pay off other bills, and could increase money spent on consumables by those homeowners. The idea has appeal since it would not require any action by Congress.
Without some sort of intervention to help struggling homeowners, foreclosures could flood the market, putting additional downward pressure on real estate prices. An increase in the banks' non-performing real estate (called Real Estate Owned, or REO), caused banks to have less money for home loans. When the homes do sell, they don't provide as much money to the banks due to those lower prices.
In addition to mortgage refinancing, another idea that has garnered significant attention is turning properties owned by Fannie Mae and Freddie Mac into rental properties or other uses. The refinancing plan has the most support but some investment firms are also backing the rental plan. Many other proposals are also under consideration, including how to get homeowners outside of Fannie Mae and Freddie Mac into the program. The private sector has also been asked to weigh in.
Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are two of the biggest participants in the home loan industry. They typically buy loans from banks to sell as investment securities, thereby freeing up the banks' money for additional loans.
Fannie Mae, founded in 1938 during the Great Depression, and Freddie Mac, founded in 1970, are government sponsored enterprises, using government money to back their securities. Together they back about $2.4 trillion in home loans with mortgage rates higher than 4%. Both were taken over by the government in 2008.
About 20 percent of homeowners currently owe more than their homes are worth, an estimated $700 billion. Many homeowners can't refinance their loans because the value of their homes has fallen or their credit score has fallen. In order for any plan to work, that is the market that must be helped first. A mortgage refinancing program could save those homeowners as much as $85 billion. Opposition could come from the regulator overseeing Fannie Mae and Freddie Mac, as well as investors who bought government-backed mortgage bonds.
Any plan must also stimulate the economy and cost the government little or nothing. A successful plan could provide a strong and immediate economic stimulus since it would allow homeowners to remain in their homes, would free up homeowners' money to pay off other bills, and could increase money spent on consumables by those homeowners. The idea has appeal since it would not require any action by Congress.
Without some sort of intervention to help struggling homeowners, foreclosures could flood the market, putting additional downward pressure on real estate prices. An increase in the banks' non-performing real estate (called Real Estate Owned, or REO), caused banks to have less money for home loans. When the homes do sell, they don't provide as much money to the banks due to those lower prices.
In addition to mortgage refinancing, another idea that has garnered significant attention is turning properties owned by Fannie Mae and Freddie Mac into rental properties or other uses. The refinancing plan has the most support but some investment firms are also backing the rental plan. Many other proposals are also under consideration, including how to get homeowners outside of Fannie Mae and Freddie Mac into the program. The private sector has also been asked to weigh in.
Get your Free Customized Mortgage Rate Quotes
Please Select Your State
