Officials have created many plans to the mortgage default and foreclosure rates across the country. Some lawmakers now have a new plan to buy up underwater mortgages and refinance them.
Senator Jeff Merkley of Oregon spearheads the idea, called the Rebuilding American Homeownership Trust. This plan would buy roughly 8 million loans from underwater households and revamp them.
“There is no robust program that enables large numbers of families trapped in high-interest loans across America to refinance,” Merkley wrote in a paper detailing the plan. “The lack of such a program hurts our families, our communities, and our economy. That is unacceptable, especially because such a program is entirely feasible.”
Under the program, borrowers would likely be able to opt for a uniform 4 percent, 15-year fixed-rate mortgage rate to make their payments more affordable. By cutting the life of a loan, households would be build equity faster.
It is unclear which agency would implement the program. But some experts believe it would go to the Federal Housing Administration, Federal Home Loan Banks or Federal Reserve.
Previous plans, such as the Home Affordable Refinance Program and Home Affordable Modification Program, have fallen short of their intended targets. However, Merkley believes the bill could be the answer. Giving borrowers a chance to build equity, could help the market on many levels.
What might this mean?
If the bill passes, underwater homeowners would have greater financial strength. That would help prevent foreclosures and help the economy.
In addition, once you build equity, you could use an FHA refinance to withdraw funds from your home. This money can put toward a number of different investments. Some options might be improving your home, funding education or buying a new car.
Better values could improve property supply
Many underwater homeowners are currently unwilling to sell their homes since they would take a loss. This means there are very few available homes right now in some areas.
By boosting the equity of nearly 8 million borrowers, the market could shift. Potential sellers may list their homes, giving buyers more choices.
There were an estimated 2.39 million existing homes, including single-family houses, condominiums, townhouses and co-ops, in supply throughout the country in June. This may seem like a lot. But it is actually a 3.2 percent decline from the previous month and 24.4 percent less than a year earlier, according to the National Association of Realtors.
Should the Rebuilding American Homeownership Trust go into effect, housing supplies may surge in the near future, creating even more opportunities for first-time homebuyers.
By staying up-to-date on a fluctuating housing market, you’ll be able to make informed decisions when it comes to refinancing your home loan or qualifying for a mortgage. Using a home mortgage rate calculator provided by Freedom Mortgage to determine your best course of action could keep some extra cash in your pockets every month.
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