A new refinance plan could help those that own Encinitas real estate get above water on said Encinitas real estate.
A new plan to provide aid to underwater borrowers, proposed by Senator Jeff Merkley of Oregon, is gaining favor with the Secretary of the Treasury Timothy Geithner. The plan would establish a temporary trust backed by the government that would aid approximately 8 million borrowers currently underwater on their mortgages to refinance with no cost being passed on to taxpayers.
In this plan monthly payments would either be lowered or allow the borrowers to regain equity at a quicker rate. A trust through the FHA, Federal Home Loan Banks, or the Federal Reserve would be established, which would purchase mortgages meeting the criteria of the plan from private lenders.
The borrowers would then have 3 years to refinance into one of these options”
- 15-year mortgage at a 4% interest rate, designed to help the borrower rebuild equity quicker
- 30-year mortgage at 5% to lower monthly payments
- Take out 2 mortgages, the first at 95% of the home’s value and the second to cover the rest of the balance, with the second mortgage not accruing interest or requiring payments for five years.
This plan would make a significant dent in the 11.4 million borrowers who remain underwater on their mortgages, potentially allowing 8 million (or roughly 70%) of borrowers to get above water.
At this point the Treasury Secretary is looking into whether or not the federal government has the legal authority and resources to implement the plan, but keep checking this Encinitas Realtor blog, as I promise I will keep you up to date on any developments the program goes through and how it may affect your homes for sale in Encinitas.