Obama: Cut FHA refinancing fees
Lenders agree to review foreclosures on military members
3/7/2012WASHINGTON -- President Obama on Tuesday unveiled two new housing initiatives.
In his first major news conference of 2012, he announced a plan to cut refinancing fees for any loan insured by the Federal Housing Administration. He also outlined an agreement with banks to review foreclosures for members of the military since 2006 and provide compensation to anyone who wrongfully lost a home.
Neither proposal requires Congress' approval. But they are more modest than a proposal for a $10 billion refinancing plan that Mr. Obama asked lawmakers to pass in his January State of the Union address.
Here's how the FHA plan would work: Currently, the federal government offers a program to allow borrowers with loans backed by the Federal Housing Administration to refinance at lower cost. But the fees for refinancing have kept many borrowers from taking the government up on its offer. The administration estimates that an additional 2 to 3 million homeowners could end up refinancing under its program.
Under the old program, FHA borrowers who owe $175,000 on a mortgage could refinance into a 4 percent loan and whittle the monthly payments down to about $1,010 per month. Under the new program, with the lower fees, that same borrowers could reduce payments even further, down to $915 per month.
Meanwhile, the administration also has struck an agreement with various banks and lenders to conduct a review of foreclosure practices for military members.
Any service member or veteran whose home has been wrongly foreclosed on since 2006 will receive compensation equal to a minimum of $116,785 plus any home equity lost since the foreclosure. This compensation will come from the mortgage servicers who conducted the foreclosures. In addition, any service member who was wrongly denied the opportunity to refinance will receive a refund of money lost.
The agreement, and money for relief, comes on top of the $25 billion settlement that the federal government and 49 state attorneys general reached with five of the nation's largest banks last month over flawed and fraudulent home disclosures.
The administration also will pay an additional $10 million into the Veterans Affairs fund that helps support loans for veterans.
Also Tuesday, the President told business leaders that the nation needs to reform its tax system.
"The economy is getting stronger and the recovery is speeding up. The question now is how do we make sure it keeps going," Mr. Obama said to the Business Roundtable, an association of chief executives of top U.S. corporations.
He told more than 90 executives that the nation would "have to deal with revenue and that's something that I think the American people instinctually understand, that if we do this in a balanced way, we can solve our problems."
Mr. Obama recently outlined a corporate tax overhaul that would lower rates but eliminate loopholes and subsidies supported by the business world. The plan is unlikely to pass in an election year but sets up a debate with Mr. Obama's Republican opponents on taxes.
The President's plan would lower the corporate tax rate to 28 percent, and Mr. Obama has called for Bush era tax cuts to end on individuals making more than $200,000, thus increasing their taxes, and for a 30 percent minimum tax on taxpayers who make $1 million or more. The plan has been assailed by Republicans, who contend it will curb business development.