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Senators Reintroduce Bill to Expand HARP to Homeowners with Equity
Two U.S. Senators havernreintroduced a bill which aimed at giving Freddie Mac and Fannie Mae (the GSEs)rnfinanced homeowners with equity the some opportunity to refinance as currentlyrnenjoyed by homeowners who are underwater. rnThe Responsible Homeowner Refinancing Act would extend the guidelinesrnand reduced fees available under the Home Affordable Refinance Program (HARP)rnto homeowners regardless of the loan-to-value (LTV) ratio of their current GSErnowned or guaranteed loan.</p
According to the THOMAS Library ofrnCongress website, the bill was originally introduced on May 10, 2012 andrnreferred to the Senate Banking Committee where it apparently died. The new version is sponsored by Robert Menendezrn(D-NJ) and Barbara Boxer (D-CA).</p
According to its sponsors, thernbill would be available to borrowers who are current on their existing GSErnowned or guaranteed loans. It would:</p<ul
The lender currently servicing a loan has an advantage over a new lenderrnwhich faces stricter underwriting criteria and greater risks from the GSEs’rnreps and warranties should the borrower default. These different standards have hindered competition,rnresulting in higher prices and less favorable terms for borrowers. The proposed legislation would direct thernGSEs to require equalize the underwriting and associated reps and warranties betweenrnnew lenders and current servicers.
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The revisedrnHARP guidelines continued to distinguish between borrowers with LTVs above 80rnpercent and those below, leaving higher equity borrowers with greater costs andrnadministrative burdens and effectively locking them out of the program. The bill will allow allrnlenders to offer a single, streamlined program to all GSE borrowers who havernbeen paying their loans on time.
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Underrnenhancements to HARP earlier this year, some fees for HARP loans were loweredrnand others were eliminated completely, creating what the sponsors call anrneconomically indefensible situation in which borrowers with significant equityrnface steeper costs for refinancing than borrowers with no equity and hencernpresenting considerably greater risk. rnThese additional fees can be as high as two percent of the loanrnamount. The bill prohibits the GSEs fromrncharging up-front fees to refinance any loan they already guarantee, which isrnalso in the best financial interests of the GSE’s and taxpayers.
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Borrowers who live in communities without arnsignificant number of recent home sales are often precluded from the AutomatedrnValuation Models widely used by the GSEs and must pay hundreds of dollars for arnmanual appraisal to refinance. Thernproposed bill will require the GSEs to develop additional streamlinedrnalternatives to manual appraisals, eliminating a significant barrier andrnreducing cost and time for borrowers and lenders alike, especially in ruralrnareas
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Since participation in HARP requires that borrowers be current on theirrnloans and with a demonstrated commitment to timely payments, there is no reasonrnto require proof of employment or income for these loans. The GSEs already own the risk which will onlyrndecrease with lower interest rates and payments. The bill eliminates employment and incomernverification requirements, further streamlining the refinancing process andrnremoving unnecessary costs and hassle for lenders and borrowers alike.
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The sponsors cite the Congressional BudgetrnOffice which says the bill will pay for itself through reduced default rates ofrnexisting GSE loans.</li</ul<pMenendez said, "Passing this bill will get rid of the red tape that leavesrnmillions of borrowers trapped in higher interest loans, puts money back intornthe pockets of middle class families, and strengthens our economy. I'm askingrnRepublicans to join us in putting families first." <br /<br /Boxer said, "This bill is a win-win-win: homeowners will have more money inrntheir pockets, Fannie and Freddie will see fewer foreclosures, and the housingrnmarket and economy will be strengthened. That's why the Menendez-Boxer bill hasrnsuch broad support from industry and consumer groups."</p<pThe legislation has received support from thernMortgage Bankers Association, National Association of Realtors, NationalrnAssociation of Home Builders and the Center for Responsible Lending.
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Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.
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