US May Let Millions Refinance at 4%

Proposal could save homeowners $85B annually
By Evann Gastaldo,  Newser Staff
Posted Aug 25, 2011 9:51 AM CDT
The government is trying to avoid more of these.   (AP Photo/David Zalubowski, File)

(Newser) – Help could be on the way for struggling homeowners with government-backed mortgages: The Obama administration is considering a proposal that would allow such homeowners to refinance their mortgages at today's interest rates, which hover around a low 4%. Many homeowners can’t currently refinance because they owe more than their house’s current value or have poor credit. Such a move could impact millions of homeowners and save them an estimated $85 billion a year, thus stimulating the economy by freeing up that money to be spent in other areas, the New York Times notes.

The administration is considering other options to help homeowners, including a rental program to keep foreclosed homes from flooding the market, but the refinancing plan would likely have a greater impact: A July estimate noted that $2.4 trillion in Fannie Mae- and Freddie Mac-backed mortgages had interest rates of 4.5% or higher. It's not clear if the program would be extended to those who are delinquent on their mortgages. Two groups that probably aren't into the idea? Fannie and Freddie's regulator and government-backed mortgage bond investors.

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