Up to three million U.S. homeowners could save around $1000 a year through cheaper government-backed mortgages unveiled by the White House on Tuesday in an election year move to help the shaky housing market.
The step is the latest in a series by the Obama administration to aid struggling homeowners. It would reduce fees on mortgages the Federal Housing Administration insures so as to enable borrowers with higher-cost FHA loans to refinance.
The White House said the lower fees could save a typical FHA borrower about a thousand dollars a year.
As many as three million FHA borrowers would be eligible for the new terms under the agency's "streamline" refinance program.
The White House expected "hundreds of thousands" of borrowers would participate.
"This program has helped hundreds of thousands of families refinance, but lender reticence and fees have kept many families from participating," the White House said in a statement.
President Barack Obama is expected to discuss the new plan and efforts to compensate members of the military who may have been wrongfully foreclosed upon at a news conference later on Tuesday.
The U.S. housing market has shown some signs of life in recent months, but prices are still under pressure from a rising tide of foreclosures. About 11.1 million Americans now owe more than their homes are worth.
While mortgage rates are at historic lows, many Americans lack the equity to refinance. Others are locked out by tight credit conditions.
Obama, who faces re-election in November, has announced several changes to the administration's housing policies this year to help borrowers, including an expansion of an existing mortgage relief program that had failed to reach as many homeowners as hoped.
The latest plan, which does not need congressional approval, reduces the costs on up-front FHA mortgage insurance premiums to 0.01 percent from 1 percent of a borrower's loan balance for refinancing under the "streamline" program. It also cuts the annual fee for these loans half to 0.55 percent.
It applies to loans taken out before June 1, 2009.
The FHA's "streamline" refinance program allows borrowers with loans backed by the agency win new loans with a simplified process that tries to remove many of the hurdles to borrowing, including appraisals and credit checks.
Many FHA borrowers have found refinancing prohibitive in recent years because of increased insurance premiums. The administration has been raising fees for FHA loans to shore up the agency's dwindling capital and shrink its footprint in the market. The FHA backs about a third of all new mortgages.
With mortgage rates hovering around 4 percent, the administration estimates a typical FHA borrower with $175,000 outstanding on their loan could save $100 a month by refinancing into a reduced-fee mortgage.
© 2014 Thomson/Reuters. All rights reserved.