Mortgage Refinancing: The Solution or Addition to the Problem

Recently the federal administration proposed a mortgage-refinancing plan. This plan would allow people whose loans exceed the value of their homes to refinance, which they are currently ineligible for. At present, 20% equity and exceptional credit are required to refinance loans. While the plan does have its benefits nonetheless, there are limitations (e.g. limited impact considering the housing market and economy as a whole) and criticisms of the plan (e.g. not radical enough). However, the mortgage refinancing proposal does attempt to minimize the effects of the failing housing market while preventing taxpayers from financing the industry’s failings.

        

This blogger agree with the proposed mortgage-refinancing plan. Lower monthly payments would go a long way towards minimizing the strain and stress of borrowers’ financial woes on a day-to-day basis. Moreover, people would only be eligible if they were consistently paying their loans. Therefore, there is a level of accountability. Additionally, the plan is a good median between full-fledged housing bailout and doing nothing. However, this blogger questions the long-term benefits of the plan. Evidence indicates even people who have not been financial impacted by today's economy are still tightening their purse strings. One only has to look at big business and corporations which continue to make profits but limit investments (e.g. job development). Therefore, while this plan will be directly beneficial to borrowers, this blogger is unsure it will have a significant impact on the overall economy and finances of the nation as a whole, as discussed in the article “Opposing view: Let the mortgage market heal itself.” This also brings into question to what extent people are financial responsible for their neighbors and what many consider their bad investment decisions.  

For more information on this topic refer to the following:

The USA Today's editorial “Mortgage refinancings could boost the economy.”  

The New York Times' article "On the Road to Relief."

The USA Today's article "Opposing view: Let the mortgage market heal itself" (referred to above).