Enter the Responsible Home Owner Refinancing Act (S. 3085), authored by senators Bob Menendez (D-N.J.) and Barbara Boxer (D-Calif.), which would eliminate some restrictions in Fannie and Freddie guidelines that have impeded underwater home owners. Among the provisions in the bill is a proposal to eliminate appraisal costs and some upfront fees for home owners who wish to refinance; so-called risk-based fees could cost a borrower up to $4,000 on a $200,000 loan. What’s more, the bill would offer the chance to refinance into a lower rate to home owners who continue to make their monthly mortgage payments on time, even though they owe more to their lenders than their homes are currently worth. Lenders typically don’t green light such loans for a refi.
Mark Zandi, chief economist at Moody’s Analytics and one of the most respected voices in housing policy, says that more than two-thirds of American home mortgages are now financed at APRs of 5% or higher — significantly above current rates. Removing barriers to refinancing would help more home owners continue to stay current on their mortgage payments.
The NATIONAL ASSOCIATION OF REALTORS® reports that the bill would help 3 million home owners refinance their homes, and save the average borrower about $2,800 per year. That’s money that would help spur consumer spending as well as pay down family debt, both essential to long-term sustained growth. In addition, the non-partisan Congressional Budget Office estimates that a program like this one might help more than 110,000 home owners save their homes from default. (Houselogic 6/19/12)