On Thursday the Obama administration will promote a housing refinance campaign called the #MyRefi campaign to streamline refinancing and help to support the slow recovering U.S. housing market. The housing refinancing campaign includes a variety of new proposals that are intended to provide financially stressed homeowners with the opportunity to refinance their underwater homes and benefit from low interest rates.
The most compelling proposal is the Responsible Homeowner Refinancing Act of 2012, proposed by Senate Democrats Robert Menendez of New Jersey and Barbara Boxer of California.
The refinancing act would benefit homeowners whose mortgages are owned by government entities Fannie Mae and Freddie Mac, and whose homes are “underwater” or worth less than the value of their home loan.
Passing the Responsible Homeowner Refinancing Act of 2012 will require congressional approval.
The proposals in the Responsible Homeowner Refinancing Act of 2012 include:
- Extend streamlined refinancing under HARP 2.0 to GSE borrowers with loans made prior to June 1, 2010. Currently, HARP Eligibility guidelines restrict borrowers who have Fannie Mae or Freddie Mac loans that were closed prior to June 1, 2009.
- Eliminate all up-front fees, as well as the costs for appraisals.
- Streamline the refinance process by removing the requirement to provide income or employment documentation.
- Improve competition in the marketplace by requiring the same underwriting standards for non-servicers and servicers.
- Penalizing second lien holders and mortgage insurance providers who prevent borrowers from refinancing their first mortgage.
Home borrowers who would become eligible for refinancing under the proposal would save on average between $2,500 and $3,000 annually, according to industry experts.
The Obama Administration has claimed the wider Home Affordable Refinance Program will help an anticipated 4-5 million underwater homeowners.
PRweb reported that Director of Economics for Fannie Mae, Orawin T. Velz, made statements in June, 2012, about how refinancing can help to restore the financial health of U.S. households.
In Velz’s report she identified a number of benefits to the economy from a large scale streamlined refinance program, which would allow every homeowner to lower their interest rate to four percent, regardless of whether they had a mortgage with Fannie Mae, Freddie Mac, FHA or VA.
Advocates of a true HARP 3.0 refinance plan believe the possible savings to homeowners would grow to $70 billion and would have a positive impact on up to 30 million borrowers.
Velz stated, “While it is impossible to know exactly what the macroeconomic impact of a large scale refinance program on the economy would be, it is true that refinancing activity over the past several years has helped substantially in bringing down households’ debt service burden, which is one gauge of household financial health.”
In May the Federal Housing Finance Agency, the regulator of Fannie Mae and Freddie Mac, reported there was just 1.2 million HARP refinances since the program’s inception in 2009.
Although interest rates are currently at historic lows, refinancing applications have been declining week over week.
This CNBC video reported about the weekly decline.
According to an article written by Michael Sauter of 24/7 Wall St, “Nearly one in three mortgages are underwater, amounting to more than 15 million homes and a total negative equity of $1.19 trillion.”
Allowing borrowers to refinance through the Responsible Homeowner Refinancing Act of 2012 will ease the financial burden for underwater homeowners, lower the risk of foreclosures and short sales, and prevent a further slide of home values in local U.S. housing communities.