Why Obama is unveiling mortgage relief plan on Super Tuesday
President Obama will announce a mortgage relief plan to help some 3 million homeowners. Is it coincidence that Obama's first news conference since November is during Super Tuesday?
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Other developments in the Middle East, where turmoil has soured some of the promise of last year's Arab Spring, are also likely to be addressed. Syria's bloody crackdown on protesters has increased pressure on Obama to intervene. Republican Sen. John McCain on Monday urged the United States to launch airstrikes against Syrian President Bashar Assad's regime to force him out of power.Skip to next paragraph
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Under the housing plans Obama was to announce Tuesday, FHA-insured borrowers would be able to refinance their loans at half the fee that the FHA currently charges. FHA borrowers who want to refinance now must pay a fee of 1.15 percent of their balance every year. Officials say those fees make refinancing unappealing to many borrowers. The new plan will reduce that charge to 0.55 percent.
With mortgage rates at about 4 percent, the administration estimates a typical FHA borrower with $175,000 still owed on a home could reduce monthly payments to $915 a month and save $100 a month more than the borrower would have under current FHA fees.
Though 2 million to 3 million borrowers would be eligible, the administration official would not speculate how many would actually seek to benefit from the program.
Past government initiatives aimed at the troubled housing market have fallen far short of expectations. The Obama administration's signature foreclosure-prevention program, the $29 billion Home Affordable Modification Program, was started to help those with heavy debt loads avoid losing their homes. But it has failed to help more than half of the 1.7 million troubled homeowners who have applied to lower their mortgage payments on a permanent basis.
A separate plan, the Home Affordable Refinance Program, which allows borrowers with loans backed by Fannie Mae and Freddie Mac to refinance at lower rates, has helped about 1 million homeowners, well short of the 4 million to 5 million the administration had expected.
About a quarter of all U.S. homeowners, about 11 million, are underwater on their homes, owing more on their mortgages than their homes are worth, according to CoreLogic, a real estate data firm.
About 30 percent of home loans started last year were through the FHA. Many first-time homebuyers use these loans because they only require 3.5 percent of a home's price as a down payment, instead of a typical 10 to 20 percent in the private mortgage market.
For service members and veterans, Obama will announce that major lenders will review foreclosures to determine whether they were done properly. If wrongly foreclosed upon, service members and veterans would be paid their lost equity and also be entitled to an additional $116,785 in compensation. That was a figure reached through an agreement with major lenders by the federal government and 49 state attorneys general.
Under the agreement, the lenders also would compensate service members who lost value in their homes when they were forced to sell them due to a military reassignment.
Associated Press writer Derek Kravitz contributed to this report.