Overview: The Obama administration yesterday evening released the details of their "Homeowner Affordability and Stability Plan", which has three main components: 1) Improve access to refinancing, 2) Restructure mortgages that are at risk of default, 3) Support low mortgage rates through Fannie Mae and Freddie Mac.
Details: The refinancing part of the program will allow homeowners, who have existing loans already backed by Fannie Mae or Freddie Mac, to refinance even if their loan-to-value has risen above 80%. The Obama administration estimates that the looser refinancing rules would provide the opportunity for 4-5 million homeowners to eventually refinance via the GSEs. This will make the Treasury and the Fed's MBS purchase programmes somewhat more powerful, as more borrowers would have the opportunity to refinance at the lower rate.
