Underwater homeowners may get additional federal assistance for refinancing government-backed loans under a proposal being revived in the U.S. Senate.
Democratic Senators Robert Menendez of New Jersey and Barbara Boxer of California plan to introduce a bill as soon as this week that would expand the existing Home Affordable Refinancing Program by promising lenders they won’t be forced to absorb the loss on refinanced loans that default, according to a person with knowledge of the matter. The person asked not to be identified because the timing is not final.
The bill is the first of a series of measures planned by the White House and congressional Democrats to promote refinancing as a way to spur a recovery of the housing market.
The Menendez-Boxer bill, a new version of a measure that failed to advance in the last session of Congress, would include a one-year extension of HARP, which is aimed at helping borrowers who are current on their mortgages but unable to refinance because their home values have dropped. The program, which applies to loans backed by U.S.-owned mortgage finance companies Fannie Mae and Freddie Mac, is set to expire at the end of this year; the bill would extend it through 2014.
“We believe the legislation — if it could be adopted — would be positive for the mortgage originators by giving them more time to find borrowers eligible for HARP,” Jaret Seiberg, senior policy analyst at Washington Research Group, a unit of Guggenheim Securities LLC, wrote in a market commentary today.
Menendez and Boxer were unable to pass the bill during the last session of Congress because they were unable to garner Republican support without opening up the measure for amendments.
Passage also is not assured this session, Seiberg wrote.
“We detect little support among House Republican leaders,” he said. “So even if it can pass the Senate, it may well die in the House.”