Details are vital in president’s mortgage relief proposal

Last week we talked about the apparent winners and losers in the president’s plan to help

homeowners. Now we have the details we’ve been waiting for — information on who gets what and how lenders will be encouraged to participate.

One of the early surprises was the scope of the refinancing plan. In case you haven’t been paying

• Attention, this part of the program is aimed at responsible homeowners who would like to refinance to today’s low interest rates but are prevented from doing so due to falling home values.
  

We had originally been told that only “conforming” loans would qualify for this departure from conventional “loan to value” guidelines. In other words, the benefit would only be available to borrowers whose loan balance was less than the Fannie Mae maximum loan amount of $417,000.

I was particularly pleased to see that the details of the plan allow refinancing up to a current balance of $729,750. This part of the plan makes good sense, and here’s why:

• The program is only available to owner-occupants who are current on their existing loans. Borrowers in this group are statistically least likely to default.
  
• The program is only available for loans which are owned or guaranteed by Fannie Mae or Freddie Mac. Since the government is already on the hook for these loans, it makes sense to make them affordable, thus slowing down the foreclosure rate.
  

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