By Eugene T. Lowe
February 13, 2012

President Barack Obama presented on February 1 the details of his plan to deal with the nation’s housing crisis. Specifically, the President is proposing to offer broad-based refinancing to help borrowers take advantage of historical low interest rates and save an average of $3,000 per year. While there are many details to the plan, what should be noted is that borrowers not insured by Fannie Mae or Freddie Mac will be able to refinance their homes. Currently, this is not the case. Through the use of a proposed Financial Crisis Responsibility Fee, large financial institutions will have to pay a fee that will pay for the plan, thereby not adding to the national deficit.

The President’s plan also introduces a Homeowner Bill of Rights that is intended to “make sure that borrowers and lenders play by the same rules.” These rules include such provisions as “full disclosure of fees and penalties” and “support to keep responsible families in their homes and out of foreclosure.” Borrowers would also have “access to a simple mortgage disclosure form” to make sure that they understand the loans being received.

A number of other steps are also a part of the President’s plan, such as a pilot to transition foreclosed property into rental housing to help stabilize neighborhoods. The Federal Housing Finance Agency (FHFA), Treasury, and HUD are developing the pilot. In addition, banks and GSEs (Government Sponsored Enterprises) will provide up to 12 months of forbearance to unemployed borrowers looking for work. There will also be resources devoted to investigating “the misconduct that contributed to the financial crisis.”

The Home Affordable Mortgage Program (HAMP) will have its eligibility expanded to reduce additional foreclosures and people will be put back to work through a program called Project Rebuild that will help rehabilitate neighborhoods.