Last April, president Obama launched a housing relief plan to help millions of homeowners. Since then, less than 100,000 homeowners have used the plan to refinance. The government is making every effort to expand the reach of the program and encourage homeowners to refinance into more affordable mortgages. For homeowners considering refinancing, or looking to save their home from foreclosure, Obama's plan is still active, and may be able to help.
The Story behind Obama's Housing Relief
The housing crisis of 2009 forced the government to take historic steps to help protect Americans from foreclosure. When Barrack Obama launched the Making Home Affordable (MHA) program last April, his goal was ambitious: help millions of American homeowners avoid foreclosure by getting them more affordable mortgage payments. The plan, Obama said, would provide relief for 7-9 million homeowners.
Since then the plan has helped a fortunate few, who have known about it and taken advantage. John Jordan and his wife, for example, purchased a home in 2004, and due to declining property values were finding it difficult to refinance their home loan. With MHA, they were able to get a government backed loan at a much lower rate. "We’re quite happy the program was there, or else we would not have been able to proceed with the refinancing," says Jordan, who purchased the home in 2004.
However, most homeowners have failed to take advantage of the program. A recent report shows that although 9 million homeowners potentially qualify, only 85,000 homeowners have refinanced and taken advantage of the substantial benefits offered by the program.
There are a number of reasons why the plan has come up short. One is lack of awareness. Experts say that 50% of foreclosures victims never contact a bank or servicer in an attempt to save their home. In order to spread word about relief opportunities the government launched a campaign highlighting the benefits or refinancing with MHA.
Another problem lies with the banks. Although Obama's program encourages banks to refinance troubled loans, many banks initially delayed and stalled MHA refinance applications, due to tight credit markets. Since then, the credit markets have opened up and the banks have expedited their processes, making the refinance process much easier and smoother.
Finally, under the rules initially outlined in the plan, if a homeowner owed more than 105% of the value of their house, they were ineligible to refinance under Obama's plan. Since then the government has increased the limits so that a homeowner who owes 80-125% of the value of their home is able to refinance under the plan. The new limit opens up refinancing opportunities to a huge class of homeowners previously ineligible.
Rates Close to All-Time Lows
Experts expect the number of government-aided refinance applications to rise in the coming months. The main reason for the expected increase is that fixed mortgage rates have fallen to levels that are close to 30-year lows. For homeowners with rates locked in at much higher levels, Obama's plan offers a clear money saving opportunity.
Furthermore, as the deadline for the plan for the plan draws near, more homeowners will be racing to submit their applications. According to Marve Stockert, executive director of IAMP, "this type of program may not come around again." Home Affordable Refinance expires on June 10, 2010
Although Obama's refinance plan probably won’t help the 7-9 million homeowners originally hoped for, the government is taking all steps to make sure that as many homeowners as possible get relief. Though MHA makes no guarantees, there’s no reason a decrease in your home value should prevent homeowners from refinancing in the current market.