HispanicBusiness

The Obama administration's latest refinancing proposal could extend mortgage refinancing opportunities to millions of homeowners, but it faces plenty of opposition.

The plan the president outlined Wednesday is intended to help qualifying borrowers refinance into lower-interest-rate loans, saving them $3,000 a year on average, even if they owe more on their home than it's worth.

It potentially targets up to 3.5 million homeowners who haven't been helped by existing government refi programs that cover loans held by Freddie Mac and Fannie Mae, which own or guarantee one of two home loans.

But because the loans would be insured by the Federal Housing Administration, Congress needs to approve it.

That'll be tough to get, economists and others say. The Republican-controlled House of Representatives will balk at Obama's pitch to tax banks to pay for the plan, estimated to cost $5 billion to $10 billion. They'll also be loath to hand Obama a victory in an election year.

"Passage will be an uphill battle," says Jed Kolko, economist for real estate website Trulia.

The plan would shift more of the nation's mortgage risk to the FHA, which is struggling to shore up reserves to cover expected losses.

The proposal may especially raise concerns because borrowers wouldn't need to produce tax returns to verify income -- although they'd likely have to be employed -- or have the home appraised. They would also have to be current on their mortgage and have a minimum credit score of 580, which is considered quite low.

"There are clearly borrowers out there who could benefit from this, but it does increase risk to FHA and so will meet sharp resistance," says Ann Schnare, a former senior mortgage industry executive who has studied the FHA's finances.

Housing Secretary Shaun Donovan said risks would be mitigated because these are "safe" homeowners because they're current on loans, banks will pay for defaults via the fee and a separate insurance fund would be set up.

Republicans also criticize other administration housing programs -- which have helped fewer people than expected -- saying that they've only postponed the restructuring the housing market must go through to heal.

"None of these programs have worked. I don't know why anyone would think that this next idea is going to work," said House Speaker John Boehner, R-Ohio.