Help for homeowners

President Barack Obama on Monday unveiled a new plan designed to help homeowners who have been making their mortgage payments but are underwater in their mortgages through no fault of their own.

The proposal makes a good deal of sense for much the same reason that it makes sense for Grand Junction to refinance the Riverside Parkway bonds (see above). It will allow a million or more homeowners to cut their mortgage interest rates, reduce their monthly mortgage payments and have more disposable income.

This proposal isn’t a government bailout of people facing foreclosure. It is for those who obtained home mortgages prior to 2009, but because the housing bubble burst, their homes have lost value. As a result, they don’t have the amount of equity required to allow them to refinance at today’s low interest rates.

Obama’s plan would ease those equity requirements so many more homeowners could refinance so long as they remained current on their mortgage payments.

No federal money would go to the homeowners, and it would apply to mortgages already backed by Fannie Mae and Freddie Mac.

Bankers in these kinds of housing securities would lose some return on their investment due to lower interest rates. But that would be offset by the fact that, with reduced monthly payments, fewer mortgagees would be likely to fall into foreclosure in the future.

Obama’s plan won’t solve the nation’s housing problems, but it will help correct a problem for one segment of homeowners without putting the nation’s finances at greater risk.


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