WASHINGTON (AP) - President Obama is aiming mortgage relief at members of the military as well as homeowners with government-insured loans, the administration's latest efforts to address a persistent housing crisis.
In his first full news conference of the year Tuesday, President Obama was to announce plans to let borrowers with mortgages insured by the Federal Housing Administration refinance at lower rates, saving the average homeowner more than $1,000 a year. The President also was detailing an agreement with major lenders to compensate service members and veterans who were wrongfully foreclosed upon or denied lower interest rates.
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. The FHA provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. The loans typically go to homeowners who do not have enough equity to qualify for standard mortgages. It is the largest insurer of mortgages in the world.
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.
A senior administration official described the proposals to The Associated Press on the condition of anonymity to discuss them ahead of the announcement.