Man what a difference a week makes. Just last week I talked about the problems related to mass refinancing through Fannie Mae and Freddie Mac that are currently being floated by the Obama Administration. Well guess what — President Obama is going to float some ideas on Tuesday during his State of the Union address. What does that mean? If you haven’t ever watched the State of the Union Address, then the 2012 version will be a great time to start.

The changes are embedded within a $25B deal between the nation’s major banks and states over “deceptive foreclosure practices”. The banks involved include Bank of America, HPMorgan Chase, Wells Fatgo, Citibank, and Ally Financial. The Associated Press is claiming that this is the, “…biggest overhaul of a single industry since the 1998 multistate tobacco deal”. The details are sketchy right now, but here is what the AP is reporting:

• About 1 million US homeowners could get the principle on their mortgages written down by an average of $20,000. $17B of the settlement money will go towards helping homeowners reduce their principle, but does that mean of the settlement amounts, it will just go back to the banks? What will allow you to qualify for assistance under this program or what amount you will be able to have written down? Does it mean you will have to split proceeds of your eventual home sale with the mortgage company? We don’t have those details yet.
• Of the settlement amount, $3B will help homeowners refinance at 5.25%. They have not published details yet, but one can only think the money will be used to help people pay for their closing costs.
• Finally, $5B will be put into a settlement account to provide payments to people who were foreclosed on in the last couple of years. About 750,000 Americans will get a settlement of $1,800 each. To me, this may be one of the more ridiculous tenets of this settlement. I am not sure why people who were foreclosed on deserve settlement money unless you just want to be fair and equitable. I will stay off my soapbox here, so let’s just conclude this with I am not sure where you will be able to claim your funds.

I think that if you are looking to refinance your mortgage in the next couple of months, wait and see what the details of this new proposal are so you can make a educated decision as to what is best for you and your family. I will closely follow this situation as it develops and post new information once I have verified that it is correct.

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