President Obama on Tuesday unveiled two new housing initiatives intended to assist Americans with government-insured loans and members of the military.
In his first major news conference of 2012, Obama announced a new plan to cut refinancing fees for any loan insured by the Federal Housing Administration (FHA). The president also outlined a new agreement with banks to review foreclosures for members of the military that have taken place since 2006 and provide compensation to anyone who wrongfully lost a home.
Neither proposal requires Congress’s approval. But they are also more modest than the $10 billion refinancing plan that Obama asked lawmakers to pass in his January State of the Union address.
Here’s how the FHA plan would work: Currently, the federal government offers a program to allow borrowers with loans backed by the Federal Housing Administration to refinance their loans at lower cost. But the fees for refinancing have kept many borrowers from taking the government up on its offer. The administration estimates that an additional 2 to 3 million homeowners could end up refinancing under its program.
For instance, under the old program, an FHA borrower who owes $175,000 on his or her mortgage could refinance into a 4 percent loan and whittle their monthly payments down to about $1,010 per month. Under the new program, with the lower fees, that same borrower could reduce his or her mortgage payments even further, down to $915 per month.
Meanwhile, the administration has also struck an agreement with various banks and lenders to conduct a review of foreclosure practices for military members. Any service member or veteran whose home has been wrongly foreclosed on since 2006 will receive compensation equal to a minimum of $116,785 plus any home equity lost since the foreclosure. This compensation will come from the mortgage servicers who conducted the foreclosures. In addition, any service member who was wrongly denied the opportunity to refinance will receive a refund of money lost.
The agreement — and money for relief — comes on top of the $25 billion settlement that the federal government and 49 state attorneys general reached with five of the nation’s largest banks last month over flawed and fraudulent home disclosures.
The administration will also pay an additional $10 million into the Veterans Affairs fund that helps support loans for veterans.