Remember those rumors about a blanket refinance about two months ago?
You know, that government mortgage financiers Fannie Mae and Freddie Mac were set to forgive mortgage debt for millions of underwater homeowners so they could take advantage of the record low mortgage rates?
The same proposal that the Treasury essentially ruled out after investors began dumping mortgage bonds in anticipation they would sustain large losses if a refinancing wave were to come.
Well, Congressman Dennis Cardoza is set to unveil new legislation that does just that.
It would allow homeowners to refinance into a 30-year, fixed-rate mortgage at the prevailing market rate, currently around 4.30 percent, assuming they have a government-backed loan.
And this would be regardless of income, credit history, or the loan-to-value ratio – pretty helpful considering a third of Americans are unable to get a mortgage thanks to their low credit scores alone.
But even more of a gift for those underwater borrowers, who currently owe more on their mortgages than their homes are worth.
Remember, homeowners can only refinance with negative equity up to a 125 percent LTV.
This legislation would apparently have no limits, allowing everyone to lower their monthly mortgage payments with few roadblocks, if any.
Whether it will really happen is another question entirely (seems fairly complicated), but it seems increasingly likely that more must be done to solve the ongoing mortgage crisis.
Keep in mind that 24.1 million first mortgages had associated interest rates above six percent last year.