Obama Proposes Plan To Make Mortgage Refinances More Accessible

The government's 2008 bailout of Fannie Mae and Freddie Mac represented an unprecedented degree of government intervention into the housing market. Now, as the industry still struggles to recover, President Barack Obama is prepared to insert the government's influence further into the housing market.

Unlike some Republican lawmakers, Obama does not think that homeowners need to wait for the housing market to bottom out before they can be extended relief. The president's plan, detailed during his annual State of the Union address earlier this week, follows a recommendation by Federal Reserve chairman Ben Bernanke that the U.S. government needed to intervene in the housing market.

In short, Obama hopes that his plan will allow borrowers to take advantage of record-low interest rates on fixed-rate loans and adjustable-rate loans by making the mortgage refinance process available to more homeowners.

While the government can exercise greater control over mortgages backed by Fannie Mae and Freddie Mac, along with FHA loans, some 2.5 million loans are not able to be influenced by government actions. Obama's plan would allow owners of these properties to conduct a mortgage refinance by penalizing financial institutions with more than $50 billion in assets that refuse to extend relief to borrowers.

"No more red tape. No more runaround from the banks," Obama said. "A small fee on the largest financial institutions will ensure that it won't add to the deficit and will give those banks that were rescued by taxpayers a chance to repay a deficit of trust."

But, if the development of Obama's proposal stagnates, homeowners may need to explore other financing options for their homes. Some mortgage organizations are willing to extending financing to borrowers who do not meet the more stringent lending requirements of other lenders.

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