Mortgage help

Soon there may be good news for homeowners who are underwater and cannot refinance at the record-low mortgage interest rates. President Barack Obama is seeking changes that would give these homeowners a chance to refinance despite their predicament. If such a plan succeeds, it could put billions of dollars back into homeowners' pockets and help stabilize the housing market.

The housing meltdown left an estimated 16 million borrowers owing more on their mortgages than their homes are currently worth. Most responsibly keep up with their payments, yet they are stuck with mortgages that carry interest rates of 6, 7 or 8 percent. They would love to refinance at current rates with interest on a 30-year fixed-rate mortgage as low as 4 percent.

If that were made possible, despite borrowers having little or no equity in their home or a low credit score, it could unlock hundreds of dollars in savings every month that could then be spent to stimulate the economy. Lower mortgage costs would also make staying in the home more affordable, leading to fewer defaults and foreclosures.

The plan's details are still vague, but they would allow borrowers to essentially switch out of a higher-interest mortgage and into a lower-interest one for any loan backed by Fannie Mae or Freddie Mac, the government-controlled housing giants.

The biggest downside in all this is for investors who stand to lose when mortgages at higher interest rates are paid off early. But investors lose even more when a homeowner defaults, a scenario more likely to be avoided when mortgage payments are lowered. Working families who are current on their mortgage but can't refinance because their home's value plunged through no fault of their own deserve this break. Now it needs to get done.

?- St. Petersburg (Fla.) Times