(KMOV) – Officials in Washington are talking about a new “bail out plan” for homeowners who own more on their homes than what they’re worth.
According to The New York Times, one version of the plan could allow mortgages backed by Fannie Mae or Freddie Mac to refinance at the current interest rates that are around 4 percent regardless of the homeowner’s credit or the home’s value.
The plan is just one of many being considered, CBS news reports.
Although everyone would like to get a lower monthly mortgage payment, the issue is more complex than that according to Dr. Rich Frankel of Washington University’s Olin School of Business.
“The question is why doesn’t the bank allow the refinancing to occur and that’s probably because there’s a problem with credit risk,” said Dr. Frankel. “And, then the question is, well, if the bank is going to finance low credit customers, aren’t we just getting into subprime mortgages again, allowing the problem to continue and pushing the resolution of the problem even further?”