WASHINGTON, DC – U.S. Senator Jack Reed today joined with Senators Robert Menendez and Barbara Boxer in introducing a bill to help millions of responsible homeowners refinance at lower rates and save thousands of dollars each year.

“We need to fix the housing market and do everything we can to help responsible homeowners and get the economy going.  This bill will allow responsible homeowners to refinance and lower their mortgage rates,” said Reed.  “Extending refinancing opportunities for underwater borrowers and increasing competition in the mortgage market makes good economic sense, and I hope Republicans will join us as we seek to gain traction in our housing market and get our economy back on track.”

Currently, the average rate for a 30-year mortgage is 3.84 percent – a rate that is historically low.  Nevertheless, there are 17.5 million homeowners with loans guaranteed by Fannie Mae and Freddie Mac paying interest above 5 percent, many of whom cannot refinance at a lower rate because of unnecessary red tape and high fees.  That red tape has prevented competition among banks, so borrowers end up paying higher interest rates than if they were able to shop around.

Under the Administration’s and the Federal Housing Finance Agency’s current refinancing program (HARP), an average homeowner saves about $2,500 per year.  This bill would increase the amount they could save and would likely expand the pool of eligible borrowers by several million. 

The Responsible Homeowner Refinancing Act of 2012 removes the barriers preventing these Fannie Mae and Freddie Mac borrowers from refinancing their loans.  The bill would:

•             Extend streamlined refinancing for all Fannie and Freddie borrowers regardless of how much they owe compared to the value of their home

•             Eliminate up-front fees completely on refinances

•             Eliminate appraisal costs for all borrowers

•             Remove additional barriers to competition

•             Require second lien holders and mortgage insurers who unreasonably block a refinance to pay a fine

•             Pay for itself since reducing homeowners’ mortgage payments also reduces default rates and foreclosures, reducing Fannie and Freddie’s reliance on taxpayer bailouts.  So the bill is good for both taxpayers and homeowners.  

The bill has been endorsed by a wide array of groups including Americans for Financial Reform, Amherst Securities (mortgage investor), Center for Responsible Lending, Columbia Business School Professor Chris Mayer, National Council of La Raza, Moody’s Analytics Chief Economist Mark Zandi, National Association of Homebuilders, National Association of Mortgage Brokers, National Association of Realtors, National Consumer Law Center (on behalf of its low income clients), and Quicken Loans.

Cosponsors of the bill currently include:  Senators Merkley, Durbin, Stabenow, Franken, Begich, and Feinstein.

Reed has long been a champion of fixing America’s broken foreclosure process.  In an effort to protect consumers and hold banks and servicers accountable for providing relief to qualified homeowners, Reed introduced the Preserving Homes and Communities Act.  This bill would establish a clear set of rules and procedures in order to prevent more faulty foreclosures and to protect troubled borrowers who have been misled into expecting loan modifications that never materialized.  To help bolster Rhode Island’s economy and provide qualified homeowners with additional resources to prevent foreclosures, Senator Reed has secured over $105 million in federal foreclosure prevention funds through the Hardest Hit program, which is administered by Rhode Island Housing, and Neighborhood Stabilization Program funds.  And earlier this year, the Obama Administration launched the first phase of a proposal championed by Reed to responsibly help turn foreclosed homes into rental properties in hard-hit cities.