Menendez, Boxer Introduce Bill To Help Responsible Homeowners Refinance “This bill is a win-win-win -- a win for responsible homeowners who will be able to refinance at record-low rates, a win for mortgage lenders who will enjoy an influx of new business,
extra $4,000 on a $200,000 loan. For borrowers struggling to keep up with their payments, this is an additional cost they simply cannot afford. This bill prohibits the GSEs from charging up front fees to refinance any loan they already guarantee.
• Eliminate appraisal costs for all borrowers
Even with the GSE’s expanded use of Automated Valuation Models, borrowers who happen to live in communities without a significant number of recent home sales will have to get a manual appraisal for a HARP refinance. This bill requires the GSEs to develop and allow additional streamlined alternatives to manual appraisals to determine the value of a property for which a HARP refinancing is sought. This will eliminate a significant barrier that will reduce cost and time for borrowers and lenders alike.
• Further streamline refinancing application process
HARP already restricts participation to borrowers who are current on their loans and have demonstrated a commitment to making their payments on time – despite any loss of income or home value. Lowering the interest rate for these borrowers increases the odds that they will be able to continue making their payments and reduces the risk of default faced by the GSEs. By eliminating employment and income verification requirements, this bill further streamlines the refinancing process and allows lenders to send eligible borrowers a pre-approved application packet that they need only sign and return. Since taxpayers already own the risk of these loans, it makes no sense to impose these requirements that could prevent borrowers from getting lower payments.
• Remove additional barriers to competition
Under HARP, lenders looking to compete with the current servicer of a borrower’s loan continue to face barriers to participating in the program. This lack of competition means higher prices and less favorable terms for the borrower. This bill would direct the GSEs to require the same streamlined underwriting and associated representations and warranties for new servicers as they do for current servicers, leveling the playing field and unlocking competition between banks for borrowers’ business.
• Require second lien holders who unreasonably block a refinance to pay a fine
The bill would require lenders who do not permit a second lien to be re-subordinated to a refinanced loan, as long as that refinanced loan does not increase the risk faced by the second lien holder, to a fine that will be applied to the borrower’s primary loan balance. Many borrowers have been prevented from refinancing because their second note-holder has refused to re-subordinate their lien, even though reducing payments on the first mortgage would make it more likely the borrower would be able to continue making payments on the second, putting the second lien holder in a better position.
• Require mortgage insurers who unreasonably fail to transfer coverage to refinanced loans to pay a fine
As with second lien holders, any refinancing of a loan that makes it easier for a borrower to repay puts a mortgage insurer in a better position. Following the recent changes to HARP,