WASHINGTON (9/12/12)--Sens. Robert Menendez (D-N.J.) and Barbara Boxer (D-Calif.) this week introduced The Responsible Homeowner Refinancing Act of 2012 (S. 3522), which would "remove the barriers preventing borrowers who are making their payments on time from refinancing their loans at the lowest rates possible."
The bill is similar to legislation introduced by Menendez in May.
Overall, the bill would make it easier for homeowners whose mortgages are backed up by government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac to refinance their home loans. The GSEs would be required to offer streamlined underwriting and associated representations and warranties to both new mortgage servicers and mortgage servicers that already work with the GSEs.
The Home Affordable Refinance Program (HARP), which was created to ease the refinancing process, requires lenders to distinguish between borrowers with more than 20% equity in their home and those with less than 20% equity. Owners with high-equity homes are often subject to increased fees.
Under S. 3522, appraisal costs and other fees charged to mortgage refinancing applicants would also be eliminated for all HARP applicants. The bill would eliminate employment and income verification requirements for applicants as well.
This bill would ensure that all GSE borrowers who are making their payments have the same access to simple, low-cost refinances, regardless of the level of equity they have in their home, and would allow lenders to offer a single, streamlined program to all GSE borrowers who have been paying their loans on time, the Senators said in a release.
Menendez in a release said the bill, if passed, would eliminate the red tape that can leave some homeowners "trapped in higher interest loans" and would "put money back into the pockets of middle class families and strengthen our economy."
Boxer noted that the legislation would help lessen the number of home foreclosures.
The Federal Housing Finance Agency (FHFA) last month reported that one of every three refinances through the GSEs were made through HARP, the highest percentage claimed by the program since its inception in April 2009.
The FHFA attributed the HARP volume increase to record-low mortgage rates, as well as enhancement instituted to the program last fall. Those changes included removal of the loan-to-value (LTV) ceiling for borrowers who refinance into fixed-rate loans and fee reductions.
The senators in the release estimated that 13.5 million borrowers with GSE-backed loans could benefit by refinancing their loans through HARP.