Gov’t Officials Urge Banks to Help ‘Underwater’ Borrowers
A new plan by state and federal officials could help more “underwater” borrowers qualify for refinancing assistance. The plan is being pushed by state and federal officials as part of ongoing settlement talks with banks over alleged foreclosure abuses.
“The plan under consideration would make refinancing available to some borrowers whose houses are worth less than their loans, so long as they are current on mortgage payments,” The Wall Street Journal reports.
Many borrowers have been unable to refinance because they don’t have enough equity in their homes to qualify.
About 75 percent of all borrowers who are underwater — those who owe more on their home than it is currently worth — have “above market” mortgage rates, according to CoreLogic. Refinancing could reduce their mortgage rates by at least one percentage point, resulting in a big savings to the nearly 8 million underwater home owners, according to CoreLogic.
The ongoing settlement talks are among federal officials and the five largest lenders, Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. Any settlement reached in the talks would apply only to mortgages owned by banks, not by investors in mortgage-backed securities.
Source: “New Mortgage Plan Floated,” The Wall Street Journal (Oct. 18, 2011) [Log-in required.]