The White House has made available details of its newest proposal to help underwater homeowners refinance their mortgages to lower interest rates. Will you be able to qualify?

Here's a rundown on some of the major details of the plan, which President Obama first announced in his State of the Union message. One major sticking point: the program must still be approved by Congress before it can take effect, which is a big if.

1 - Available on most mortgages

One of the key elements of the new underwater mortgage refinancing plan is that it will be available on most types of mortgages, as long as they don't exceed funding limits (see below). That's a major difference from HARP, the administration's current underwater refinancing program, which is only available to borrowers with home loans backed by Fannie Mae or Freddie Mac.

2 - Low credit demands

Homeowners will need a FICO credit score of only 580 to qualify, which covers about 90 percent of all borrowers. Aside from that, the other credit requirement is that borrowers must not have missed a mortgage payment in the past six months or more than one in the past 12.

3 - Refinance up to $729,750

The proposal calls for refinancing underwater mortgages by converting them into FHA home loans. That means that practically any mortgage can be refinanced, as long as the amount refinanced is within FHA limits. That limit can run as high as $729,750 in counties with the highest property values, but can be as low as $271,050 in counties with the lowest housing costs.

4 - Streamlined refis on Fannie, Freddie loans

Homeowners with a Fannie Mae- or Freddie Mac-backed mortgage (which most residential mortgages are) will be able to take advantage of a streamlined application process, where they will not have to have their property appraised or document their income in order to qualify. They will, however, have to show that they are currently employed.

5 - No closing costs on short-term refis

The proposal calls for waiving closing costs for underwater borrowers who choose to rebuild equity quickly by refinancing into a mortgage with a term of less than 20 years. The administration estimates this would enable most underwater borrowers to get back into positive equity within five years.

6 - The fine print

The administration estimates the program would enable underwater homeowners to save an average of $3,000 a year by refinancing into the historically low mortgage interest rates now available. The program would be paid for by imposing a fee on the largest mortgage lenders, which would raise the estimated $5-10 billion the program would cost.

It's far from clear whether Congress will go along with the program, particularly given the opposition of many members, particularly Republicans, to any sort of new taxes, and a skepticism by the GOP toward intervention in the housing market.

However, it is an election year and it's possible that members of neither party will want to be seen as opposing legislation regarded as friendly to homeowners, particularly if the cost is to be borne by banks that are widely blamed for causing the housing crisis in the first place and who were later bailed out by taxpayers. Time will tell.

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Published on January 19, 2009