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Obama’s State of the Union Reveals Little About Mortgage Plan


So amid all the endless clapping and standing ovations, Obama did manage to get a few words out about the prospective mass mortgage refinancing plan during his State of the Union address last night.

While it wasn’t a lot, it does give us something to chew on.

During his address, he said the word “mortgage” five times. That’s not a lot, given how important mortgages are at the moment.

The first instance was that mortgages were sold to those who couldn’t actually afford or understand them. Okay, we know that, and that’s old news.

The second instance was a much more significant one. Obama noted that he’s sending a plan to Congress “that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage.” Without any “red tape.”

So this actually tells us quite a bit. It tells us that the proposed refinance plan would be reserved for responsible homeowners, most likely those that are current on their mortgage payments, and that it wouldn’t have any major barriers or tricky underwriting guidelines.

Congressional Approval Needed

Secondly, it tells us that the plan would need Congressional approval, which is pretty scary. The chances of Congress approving something of this magnitude are probably pretty slim, especially during an election year.

It also means a deal probably wouldn’t happen overnight. And could signal that Obama wants to show the public he has support for a mass mortgage deal, but that it’s not up to him in the end.

But it still could work if there’s enough pressure on both Republicans and Democrats to get the deal done.

Oh, and the proposed plan would be funded by a “small fee on the largest financial institutions,” as to not increase the tax burden for citizens.

Better Regulations and Expanded Mortgage Investigations

The third mortgage mention was a call for better regulations to avoid bad mortgage lending practices in the future, noting that we all paid for the irresponsibility that occurred in the past.

The fourth reference to mortgages was merely that “the days of signing people up for products they can’t afford with confusing forms and deceptive practices are over.”

I guess only time will tell on that one – I’m sure that’s been said after every major financial collapse.

The final occurrence of the word mortgage had to do with the “abusive lending and packaging of risky mortgages that led to the housing crisis.”

Obama noted that he’s asking his Attorney General to create a “special unit” to expand investigations into mortgage wrongdoings, speed homeowner assistance, and bust those who broke the law.

So it looks like there will be more settlements in the future related to unlawful foreclosures and shoddy lending practices.

That’s all we’ve got for now. Hopefully there will be more news on this in the near future.

In the meantime, homeowners are probably unsure what to do. Do they try to refinance the traditional way or wait for the holy grail of all mortgage deals?

Oh, and there’s always the underwater mortgage refinance program reserved for those with Fannie Mae and Freddie Mac backed mortgages, which is supposedly available, but not really grabbing too much attention just yet.

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