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Obama's Mortgage Refi Plan to Go Through FHA

After announcing during his State of the Union address a new government refinance program for, "responsible" but "underwater" borrowers with privately held mortgages, President Obama is expected to detail the plan today.

It will go through the government mortgage insurer, the Federal Housing Administration (FHA) and could cost between $5 billion and $10 billion dollars, according to senior administration officials.

Critics will also argue that the FHA, which now has an inordinately, historically large share of the mortgage market, is in no position to take on any more risk. The FHA could be considered "underwater" itself, guaranteeing about $1 trillion in mortgages but sitting on just a $1.2 billion dollar cushion to cover losses.

To be eligible, borrowers would have to be current on their mortgages, not having missed a payment in at least six months. They need a credit score (FICO) above 580, must be employed, and must have a conforming loan (between $271,050 and $729,750 depending on their location). No appraisal would be necessary, according to officials.

The plan would also require lenders to write down the value of the loan if it exceeded 140 percent of the value of the home. Administration officials say the trade-off for lenders is they get rid of a risky loan.

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