Obama to appear in Falls Church to announce mortgage refinancing plan

[struggle4progress]

Posted at 08:59 AM ET, 02/01/2012
Obama to appear in Falls Church to announce mortgage refinancing plan
By David Nakamura

President Obama will appear at a Falls Church community center Wednesday to unveil a plan to ease the sluggish housing market by making it easier for homeowners to refinance their mortgages.

Obama’s proposal would allow borrowers to refinance at federally insured lower rates even if they owe more than their homes are worth and could produce an average annual savings of $3,000 per homeowner, an administration official said ...

http://www.washingtonpost.com/blogs/44/post/obama-to-appear-in-falls-church-to-announce-mortgage-refinancing-plan/2012/02/01/gIQAOb0WhQ_blog.html?wpisrc=nl_pol_full

[zipplewrath]

1. I don't understand this part

The government also is willing to pay closing costs for those who agree to use their savings to pay down the principal of their mortgages, rather than reducing their monthly payments, the administration official said.

I'm not sure why a homeowner would choose to do that right now. Many of these folks will be taking on a debt larger than the value of the home. Why would they want to "pay it off faster"? Better to pay it off with inflated dollars in the future. Especially considering they can borrow this money at insanely low rates.

Yes, the usual advice is if you actually plan on paying off the loan, better to do it faster. But do most of these people really expect to do that? Furthermore, you can pay off a 30 year loan faster, just make bigger payments each month than required. You'll pay it off faster. But if you take out a 15 year, and can't keep up those payments, you're stuck. And since this may be in effect a "one time offer" at that point you may not be able to get ANY loan, much less a 30 year.

[DevonRex]

2. Some might. Most won't. No big deal.

Borrower's choice. The statement released didn't go into much detail, so no sense in speculating about terms yet.