The mortgage refinancing deal proposed by Senators Robert Menendez (N.J.) and Barbara Boxer (CA) has been postponed. The legislation was introduced in the early summer as a measure to help millions of homeowners refinance their home loans into low-interest rate mortgages and help fuel the economic recovery.
As it now stands, lawmakers will not address the issue of mortgage refinance until after they return from their Thanksgiving holiday leave. Initially it was thought that the bill would come up for the first vote immediately after the summer recess. However, it has been delayed, In the meanwhile, a sportsmen's bill sponsored by Sen. Jon Tester is slated for completion sometimes this week.
According to some reports, the mortgage refinancing legislation, which has received heavy support from President Obama because of its possibility of helping borrowers who have trouble making their mortgage payment, could show up on Senate agenda in December along with legislation designed to avoid the fiscal cliff-- huge spending cuts and massive tax increases, which automatically go into effect at the end of the year.
Proposed Mortgage Refinance Bill
When the two senators proposed the Responsible Homeowners Refinancing Act in May, they hyped the bill as a way to qualify more homeowners for mortgage refinancing at a time when applications for refinancing applications teetered at a historic low. The legislation was intended to address the issue of tighter credit standards by lenders, which included more stringent credit requirements, property appraisal, and verification of self-employment income.
The bill would bring together a mass of borrowers who wanted to refinance into low-interest rate loans and lenders who had a desire to make the mortgages.
The Responsible Homeowners Refinancing Act features the following items:
- Help up to 3 million homeowners borrowers qualified for mortgage refinance
- Save borrowers an average of $3000 a year
- Consumers would use the money saved from lower monthly mortgage payments to help stimulate the economy
It’s estimated that the Act, if pass, would stimulate the economy with an additional $9 billion that consumers would spend on food, clothing, gas, and other necessities. Many homeowners could also use the savings to pay down other obligations.
Remove Mortgage Refinancing Obstacles
Senator Boxer said the bill would streamline the mortgage refinancing process for homeowners with loans insured or owned by Fannie Mae or Freddie Mac. In addition, it called for the elimination of appraisal costs, upfront fees for financing, and other obstacles to mortgage refinancing.
Second lien holders who unreasonably prevented mortgage refinancing would suffer a penalty payable to U.S. taxpayers. Mortgage insurers who unfairly fail to transfer insurance coverage to assist in mortgage refinancing would also have to reimburse the public coffers.
Creating conditions to remove obstacles to mass mortgage refinancing would create much needed competition in the Home Affordable Refinance Program (HARP). Taxpayers would not have to fund the venture, which would pay for itself through a reduction in mortgage defaults and foreclosures -- thereby eliminating the need for a bailout from the government.
To qualify for mortgage refinancing under the proposed plan, borrowers would have to be current in their mortgage payments. Homeowners with underwater mortgage would be eligible to refinance their loans.