The ‘Responsible Homeowner Refinancing Act of 2013’ has been (re)introduced in the US Senate. This bill’s aim is to help homeowners that are not otherwise eligible to refinance through another program (such as HARP or Home Affordable Refinance Program) to take advantage of today’s historically low rates.
Originally introduced last year by Robert Menendez (D-NJ) and Barbara Boxer (D-CA) the bill did not have the support needed to move forward. If passed this time around it would direct Fannie Mae and Freddie Mac to require the same streamlined underwriting allowed under HARP for “same servicer” loans (refinancing with your current lender) to all lenders, leveling the playing field for all lenders.
The bill, if passed, will also extend HARP benefits to those that have 20% equity in their homes. Opening up a world of refinancing that had currently only be open to those with little to no equity (or negative equity). Currently homeowners that take advantage of the HARP program average about $2,500 in savings annually. This bill would also limit Fannie and Freddie from charging up-front fees to refinance any loan they currently guarantee. Lowering borrowing costs to deserving homeowners even further.
HARP loans currently use proprietary Automated Valuation Models, or AVMs, to determine home values without the need for slow and costly manual appraisals. However, borrowers who happen to live in communities without a significant number of recent home sales often cannot use these models and are forced instead to pay hundreds of dollars for a manual appraisal for a HARP refinance. This bill requires the Fannie and Freddie to develop additional streamlined alternatives to manual appraisals, eliminating a significant barrier and reducing cost and time for both homeowners and lenders.
HARP already requires the borrower has been current on their mortgage for at least 6 months, and has only been late (no more than 30 days) on a total of one payment for the 6 months before that, so there is no reason to require proof of employment or income for these loans. Especially since Fannie/Freddie already guarantees these loans, and lowering the monthly payment for these homeowners actually reduces the risk to Fannie/Freddie and the taxpayer. This bill eliminates employment and income verification requirements, further streamlining the refinancing process and removing unnecessary costs and hassle for lenders and borrowers alike.
The bill would also extend the expiration of HARP for an extra year, moving the date from 12.31.13 to 12.31.14.
The Congressional Budget office has analyzed the bill and determined that the bill more than pays for itself by reducing default rates on loans Fannie Mae and Freddie Mac already guarantee. As it does not add loans to the books, or allow homeowners to take cash out, there is literally no risk to the taxpayer. On top of that it would add billions of dollars of spendable/savable dollars into the US economy. Money that is currently going towards mortgage interest. It is a win-win.
According to the CBO, the bill pays for itself through reduced default rates on GSE loans, which saves taxpayers money.
~ Greg Cowart
Mortgage Consultant – 16 Years Experience