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The Responsible Homeowner Refinancing Act of 2013 is once again being introduced by Senators Menendez and Boxer. This bill would remove barriers set in place by Fannie Mae and Freddie Mac preventing borrowers to refinance to the lowest interest rate possible. Currently, if you have more than 20% equity in your home and are looking to use conventional methods of refinancing, you are technically getting charged more closing costs by Fannie Mae and Freddie Mac by doing so. Also, this bill would help borrowers who are using the HARP program by making it easier to qualify.
The reason why there are higher fees associated with these types of loans is because the banks and servicers that originate the loans have a greater fear of putbacks and loan repurchases. Currently, under the HARP guidelines, if a bank or servicer originates a HARP loan for Fannie Mae and Freddie Mac there are practically no risk associated with a buyback of the loan if it were to default. But if a bank were to originate a loan using conventional, non-HARP, methods and sell that loan to Fannie Mae or Freddie Mac, then they would be accountable if that loan were to default. The problem is that people who are not 'underwater' on their properties are either getting a higher rate than the market is giving or being charged more fees to get the going market interest rate. The bill being reintroduced would prevent Fannie Mae and Freddie Mac from charging more for such loans.
Additionally, there are no HARP-like or streamline refinance programs for borrowers who are not underwater and the loans are backed by Fannie Mae or Freddie Mac. This would create a plan to refinance these borrowers with no appraisal and less in closing costs, just like the HARP program has been doing.
Also, the bill calls for the elimination of proof of income or employment for the HARP program. Currently, a borrower using the HARP program needs to show of income and employment to be able to refinance their home. But Senators Menendez and Boxer are saying that this is a pointless guideline because if the borrower has already shown they have been making payments on time and the loan is backed by Fannie Mae or Freddie Mac, then the loan should have less barriers than it does currently. By the interest rate and payment would only create less defaults in the long run and save Fannie and Freddie more money.
Lastly, the bill would extend the HARP program until December 31st, 2014, right now, the HARP program is set to expire at the end of 2013.
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