Obama Unveils New Refi Plan, Homeowner ‘Bill of Rights’

The Obama administration rolled out an ambitious package of benefits, reforms, and structural changes Wednesday for homeowners who want to refinance their loans and avoid foreclosure.

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The plan would cost anywhere from $5 billion to $10 billion and pay for itself with fees exacted from major financial institutions if Congress moves forward with legislation proposed by President ""Barack Obama"":http://www.whitehouse.gov/administration/president-obama.

If it makes it into law, the proposal would significantly expand refinancing opportunities for underwater borrowers, shift appraisal responsibilities in distressed neighborhoods to an automated system under the GSEs, and offer servicing reforms he billed as a homeowner's bill of rights.

Obama introduced the bill at a speech he delivered in Falls Church, Virginia, where he drew on themes of economic justice from his State of the Union address last week.

""I am sending Congress a plan that will give every responsible homeowner in America the chance to save about $3,000 a year on their mortgage by refinancing at historically low rates,"" he said. ""No more red tape. No more runaround from the banks.""

Under new modifications, borrowers with single-family mortgages could refinance their loans through the ""Federal Housing Administration"":http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/fhahistory (FHA) if their FICO scores match 580.

Lenders would need to write down the balance of loans with loan-to-value ratios greater than 140, a measure the White House cast as one that would shore up equity for struggling borrowers and tamp down risk.

The plan would also reduce the cost burden for refinancing borrowers by eliminating the need to submit appraisal and tax forms to lenders and the GSEs, effectively removing manual appraisers from the process.

Without referencing any recent problems for the FHA, the White House notably highlighted several measures that it said would help relieve pressure for the agency, which continues to see capital diminish amid historically low home prices and

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a high number of defaults.

Borrowers with jumbo loans ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô the conforming limits for which Congress raised for the FHA last fall ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô would not be able to refinance under new modifications.

The plan would also set up a separate fund for the refinancing program outside the hard-hit Mutual Mortgage Insurance Fund.

""Brian Montgomery"":http://www.collingwoodllc.com/team.html, chairman of ""The Collingwood Group"":http://www.collingwoodllc.com/index.html and former FHA commissioner, credited the Obama administration with ├â┬ó├óÔÇÜ┬¼├àÔÇ£launching another round of housing assistance as too many homeowners continue to struggle.

├â┬ó├óÔÇÜ┬¼├àÔÇ£Putting politics aside on the surface, it appears to be the right and proper thing to do,├â┬ó├óÔÇÜ┬¼├é┬Ø he added, calling into question the ├â┬ó├óÔÇÜ┬¼├àÔÇ£level of participation├â┬ó├óÔÇÜ┬¼├é┬Ø expected for the program and ├â┬ó├óÔÇÜ┬¼├àÔÇ£ultimately what cost, if any, to the taxpayers ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô most of which have grown weary of the nagging housing crisis.├â┬ó├óÔÇÜ┬¼├é┬Ø

Obama also hailed a list of reforms that builds on many of the changes from new rules, orders, and guidance currently under way at the ""Consumer Financial Protection Bureau"":http://www.consumerfinance.gov/.

The so-called bill of rights calls for simple mortgage disclosure forms, easy-to-understand fine print, and an end to undisclosed fees and penalties from servicers.

He called attention to forthcoming investigations by the ""Residential Mortgage-Backed Securities Working Group"":http://www.stopfraud.gov/, which officials unveiled Friday.

""Matthew Eshbaugh-Soha"":http://www.psci.unt.edu/EshbaughSoha/eshbaughsoha.htm, an associate professor of political science at the ""University of North Texas"":http://www.unt.edu/, says that talk of a bill of rights occurs ""all the time"" in politics and sometimes in response to political challenges.

He cites the Middle-Class Bill of Rights trumpeted by then-President Bill Clinton in 1994, shortly after Democrats lost control of Congress to the Republicans.

""A lot of people look favorably on the Bill of Rights,"" he tells us. ""If they hear about it, people will be possibly disposed to the general idea├â┬ó├óÔÇÜ┬¼├é┬ª in terms of clarity for dealing with the big banks. It provides an opportunity for government to tell consumers, ├â┬ó├óÔÇÜ┬¼├ï┼ôHey, we're on your side.'""

With a general election around the corner, Obama appeared to nip at former Gov. ""Mitt Romney"":http://www.mittromney.com/ (R-Massachusetts), the presumed frontrunner for the GOP presidential nomination after a rout at the Florida Republican primary Tuesday.

He said ""it is wrong for anyone to suggest that the only option for struggling, responsible homeowners is to sit and wait for the housing market to hit bottom. I refuse to accept that, and so do the American people.""

Romney faced criticism in the lead-up to primaries in South Carolina and Florida for saying in an ""interview"":http://www.lvrj.com/multimedia/Five-questions-with-Mitt-Romney-132028338.html with the Las Vegas Review-Journal that he believes foreclosures need to ""run the course"" for housing to improve.