By Mike Colpitts
Millions of underwater homeowners could be helped under a bill that is gaining momentum in the U.S. Senate. The bill, authored by California Senator Barbara Boxer, would remove barriers that have halted millions of upside down homeowners from refinancing their homes.
“The Helping Responsible Homeowners Act” would order government backed mortgage giants Fannie Mae and Freddie Mac to waive fees and remove barriers keeping mortgage borrowers from refinancing to lower rates.
The bill would aid millions of underwater homeowners trying to hold on to their properties and aid the mortgage lending industry, troubled by the financial crisis and the real estate crash. The provision would remove refinancing limits on homes that are upside down on their mortgages or owe more on their mortgage than the home’s current value..
The bill gained momentum when a Republican Senator joined Boxer, a veteran Democrat with a flare for being dramatic as a co-sponsor of the bill. Senator Johnny Isakson (R-GA), who ran one of the country’s largest independent real estate brokerages, joined Boxer to sponsor the proposal before Congress.
“The time to help struggling homeowners is now while interest rates remain at near-historic lows,” said Boxer. This legislation would help millions of responsible homeowners who are making their payments, but are still struggling to make ends meet. By helping these homeowners refinance at lower rates, we will put thousands of dollars back in the pockets of families and strengthen our economy.”
The bill is targeted to help underwater homeowners who are able to make mortgage payments on time. The hardest hit markets in the country have lost as much as 85% in home values since the real estate collapse started more than five years ago, according to Housing Predictor data.
Mortgage giants Fannie Mae and Freddie Mac offer refinancing, but millions of borrowers have been rejected for refinancing as a result of having homes that don’t appraise high enough to be refinanced. Homeowners must also pay high, risk-based fees up front to refinance mortgages. The fees can run as high as $4,000 on a $200,000 mortgage, discouraging homeowners from even trying to obtain lower loan payments.
Interest rates on 30-year fixed rate mortgages averaged 4.51% Thursday, according to Freddie Mac, the first drop in a month for rates near historically low levels. A homeowner with a $150,000 loan lowering their interest rate by 1% would save $1,100 a year in mortgage interest. Two million homeowners refinancing would save a combined $2.2 billion annually.