The U.S. government will cut fees on federally insured mortgages and move to expand home-loan relief to military veterans, President Barack Obama announced Tuesday.
The two initiatives, a mix of private-sector payments with intervention by the Federal Housing Administration (FHA), stem from Obama's unwillingness to sit by and wait for the housing market to hit bottom, the president told reporters.
Homeowners with FHA-insured mortgages will be able to refinance with a smaller upfront fee of 0.01 percent of the loan's balance, down from 1 percent. However, only loans originated before June 1, 2009, are eligible for the program. The White House estimates that 2 million to 3 million FHA borrowers will be eligible.
The relief is unlikely to improve the current housing market, experts have said, but it will aid homeowners who have struggled with declining home values and high mortgage payments.
But cutting FHA fees may worsen the agency's already-dire financial condition. Congress warned that the FHA could require a bailout if home values continue to slide.
Obama's other latest initiative to address the persistent U.S. housing slump calls on major lenders -- Bank of America Corp., J.P. Morgan Chase & Co., Ally Financial Inc., Citigroup Inc. and Wells Fargo Co. -- to review foreclosures involving military service members and veterans since 2006. The banks are to provide these borrowers compensation equal to the lost value of their homes, plus interest and an additional $116,785, if a foreclosure is found to be improper.
The banks, after reviewing files dating back to 2008, also will refund money lost from interest payments exceeding 6 percent. And they'll compensate service members who were forced to sell their homes at a loss due to moves ordered by the military.