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A Refinancing Expansion

September 17, 2012

Unless you’re living under a rock, you know it’s a presidential election year, with Election Day less than two months away. And while many are already sick and tired of the mud-slinging and negative ad campaigns, there’s one thing that homeowners should be paying close attention to – a refinancing expansion bill the White House is urging the U.S. Senate to vote on as early as this week.

Democratic leaders say there are more than 11.3 million borrowers who owe more than their homes are worth. They believe this bill shows President Barack Obama’s support for policies aiding homeowners while Republicans voting against the measure will be painted as unsympathetic to homeowners. Republicans like Senator Robert Corker from Tennessee are leery of the immediate vote and state that it has little chance of becoming law since Republicans control the House and have no plans for a companion measure.

But such a push for widespread refinancing for homeowners who can’t take advantage of historically low interest rates because they are underwater on their mortgages is something the Obama administration has been working on for the past year. Thanks to changes made to the Home Affordable Refinance Program (HARP), many homeowners with loans backed by Fannie Mae and Freddie Mac were able to take advantage of refinancing no matter how much their loans exceeded the value of their homes. Over 500,000 homeowners took advantage of the HARP program during the first seven months this year.

The Senate bill that’s expected to come to a vote this week was written by Democrats Robert Menendez from New Jersey and Barbara Boxer from California. The bill would expand the HARP program by not forcing lenders to absorb the loss on defaulted refinanced loans even if the original loans didn’t meet Fannie Mae and Freddie Mac required standards. As it stands now, liability for bad loans is only waived when lenders refinance loans they already serviced. This is why many lenders are refusing to refinance mortgage loans serviced by other banks. The new bill would eliminate the distinction. Additional changes to the bill include limiting how many times borrowers can refinance under the HARP program. This is in hopes of giving investors more certainty when it comes to the performance of mortgage bonds.

The Mortgage Bankers Association and Senators have worked closely over the past several months toward creating legislation that will help as many Americans as possible to refinance while taking the concerns of the broad set of stakeholders in the industry into consideration. Whether the Menendez/Boxer bill passes or not, now is the best time to refinance your home mortgage and taking advantage of the HARP program and similar legislation can only be done when you contact a loan officer at Homestead Financial Mortgage.

Don’t be distracted or confused by the rhetoric in Washington. Refinancing expansion or not, there are plenty of ways to refinance your home mortgage and to save money every month. Whether you refinance your mortgage or take out a home equity loan or home equity line of credit, the only way to know what’s best for you is to contact a loan officer at Homestead Financial Mortgage and run the numbers.

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