Mortgage-rescue plan now covers more borrowers

The government is helping more distressed homeowners refinance their mortgages.

Under an Obama administration housing rescue program, homeowners with mortgages through Fannie Mae and Freddie Mac will be allowed to refinance up to 125 percent of their home's present value.

Previously, homeowners could only refinance 105 percent of its value,

One goal of the program is to lower mortgage payments through lower interest rates. The National Association of Realtors considers it a great plan that will increase the number of people who can get help in order to stay in their homes.

Borrowers will be encouraged to pay off their loans more quickly. For mortgages lasting less than 30 years, Fannie and Freddie will reduce the fees associated with refinancing. The shorter term will help homeowners build equity more quickly.

Nearly 30 percent of homeowners with mortgages today owe more than their houses are worth, according to Economy.com (by Moody). But economists at Moody's predict that in order for the new program to be very successful, mortgage interest rates will have to be below 5 percent.

Mortgage companies say they are still struggling to refinance borrowers under the previous level. The process is complicated with Fannie Mae and Freddie Mac. The companies are still training people to handle the huge number of applications. Some have a 45- to 60-day backlog for processing.

In other housing information, the National Association of Realtors announced that recently pending home sales rose six months in a row for the first time since October 2004.

It's a good sign for the housing market and for the economy.

Gabe Sanders and Susan Maxwell

Stuart Florida Real Estate

Residential Homes, Condos and Land
Waterfront and Golf Course Communities in Martin and Saint Lucie Counties

Sign up for a personal customized Market Snapshot