On October 24th, President Obama came to Las Vegas as part of his national tour for re-election. During his trip he announced his new plan to help struggling homeowner's. His "We Can't Wait" plan is targeted to homeowner's who have continued to make payments and still find themselves "underwater" and allowing them to refinance their original loan.
The plan isn't going to solve all the problems Nevada homeowners are facing, but it should make a significant impact on those seriously considering walking away.
The mortgage plan will revise the HAMP program, which was unveiled at the beginning of Obama's administration. Almost three year's later, only about 800,000 people have qualified for the policy, one-tenth of the projected 5 million people it was supposed to. The largest flaw of the program was that only those who owed 25% or more than their properties were worth were able to qualify.
Under the new program, the limit to how much a borrower can owe is gone. Fees will be reduced and banks that allow the refinance will be cleared of liability. In other words, everyone wins. The only draw back is that only borrowers whose loans are owned or guaranteed by Fannie Mae or Freddie Mac are eligible to take advantage.
The program is not expected to increase costs for taxpayers. Final details of the plan will be announced in mid-November, borrowers may not be able to enroll until the first quarter of next year.
Personally, I think this is a great idea. Hopefully, other banks will allow their borrowers to take advantage of the low interest rates and refinance. I've had so many conversations with frustrated homeowners asking, "Why won't banks just allow us to refinance?" Typically when you refinance you have to have equity in the property, since the value of the home is less than what is owed, there is no equity. Perhaps this program, if it's successful will be the first step towards a more practical idea to real solutions.
