HUD Secretary Pushes for Congressional Action on Refi Bills

To get the maximum impact from the Federal Reserve’s QE3 bond buying program, Congress needs to pass two refinancing bills that would give more than 10 million additional Americans the opportunity to refinance at today’s low mortgage rates, according to HUD secretary Shaun Donovan. 

A bill sponsored by Senators Robert Menendez, D-N.J., and Barbara Boxer, D-Calif., would extend the reach of the Home Affordable Refinance Program to potentially another 8 million borrowers with high LTV Fannie Mae and Freddie Mac loans, Donovan told a housing forum Tuesday.

The Democratic sponsors claim their bill will increase competition between lenders, lower refinancing costs, and expand the reach of the HARP refinancing program. So far, the HARP bill has been bottled up in the Senate Banking Committee by Republicans.

The second bill would open the door for the Federal Housing Administration to refinance private-label mortgages. Sponsored by Sen. Dianne Feinstein, D-Calif., bill is aimed at refinancing possibly 3 million underwater borrowers with private-label mortgages. But many senators are wary of increasing the risk profile of the thinly capitalized FHA mortgage insurance fund. 

However, one congressional observer noted that there may be a chance to pass the Menendez-Boxer bill after the Nov. 6 elections when Congress returns to Washington for a lame duck session.

The HARP bill would require the GSE regulator to level the playing field between lenders that own or control the servicing and give other lenders a chance to refinance the servicer’s loans.

Consumer and industry groups support the Menendez-Boxer bill.

The Federal Housing Finance Agency launched the HARP program in April 2009. Roughly 1.5 million GSE borrowers have been refinanced so far. 

Under pressure from the Obama administration, the GSE regulator revised the refi program late last year and the HARP 2.0 revisions went into effect in January.  

The HARP 2.0 changes have led to 520,000 refinancings during the first seven months of this year, including over 200,000 refinancings of borrowers with LTVs above 105%.

The Menendez-Boxer bill would clear away the “remaining barriers” to refinancing Fannie and Freddie loans, the HUD secretary told the housing forum sponsored by the American Action Forum and Progressive Policy Institute.