US Government set to announce plans to revive real estate market

The US government is considering
announcing a set of new proposals in order to try to revive the country’s
ailing property market and to reduce the amount of repossessions.  Reuters reports that the Obama
administration is looking at plans to help borrowers in financial trouble to
refinance their mortgage debt.

Borrowers to be allowed to refinance on low rate mortgage deals

The news service reports that the
refinancing proposals would allow certain borrowers to refinance loans that are
backed by government-owned Freddie Mac and Fannie Mae or the Federal Housing
Administration.

The government is ‘looking to
take targeted changes to an existing program that would allow more borrowers to
take advantage of low mortgage rates, including allowing borrowers to refinance
even if they owe a significant amount above their property’s current value.’

The aim of the plans is to allow
homeowners to refinance their mortgages and benefit from the current record low
interest rates.  This would cut
their monthly repayments and reduce the amount of foreclosures, helping
stabilise the value of property in the USA.

According to Freddie Mac, the
average rate on a 30-year fixed loan was 4.22 percent last week, close to the
lowest level in more than 50 years.

Reuters reports that, according
to sources, ‘Fannie Mae, Freddie Mac and the FHA, which together account for 90
percent of the U.S. residential mortgage market, would be given permission to
begin refinancing plans for borrowers that are current on their mortgage
payments and not considered seriously delinquent, according to the sources.’

Existing US property initiatives not working

The plans are designed to
complement existing policies which have so far failed to meet
expectations.  The Home Affordable
Refinance Program launched in April 2009 was intended to help 4 million to 5
million homeowners avoid repossession, but as of May 2011 it had helped only
about 810,000 homeowners refinance onto loans with lower rates.

A drop in mortgage rates and the
continued fragile economy have therefore prompted officials to look again at
ideas that could bolster the property market in the US.