Obama's New Refi Plan under Attack

By Sari R. Updated on 9/25/2013

President Obama announced his mortgage refinancing plan in his State of the Union speech last night and urged Congress to pass it.  However, even if the plan passes Congress, many believe it will fall short of solving the deepest housing problems.

Not much detail about the plan was released by the White House, but in short this plan would assist homeowners who are current on their mortgages to refinance their mortgage loan down to a lower rate and be able to save an average of $3,000 a year on mortgage payments. The plan expands HARP (Home Affordable Refinance Program) to include even mortgage loans that are not guaranteed by government-backed agencies Fannie Mae and Freddie Mac and would tax banks to raise funding.  Many think this could reach up to 3 million borrowers.

Critics claim that this plan would only boost GDP by 0.1% and it might even reach less than one-third of homeowners originally thought which will make the economic impact be even less.  The program would also do nothing for the 4 million borrowers who are 30 days or more past due on their mortgages.

Some analysts believe that the program would encounter challenges on the secondary market as well. All in all, although this plan sounds great in a presidential speech, it might face real issues when it is to be implemented as a plan to help turn the economy around.