The Need for Refinancing for All

Homeowners who made their home purchase prior to June 1, 2009 were rewarded with special mortgage refinance programs. These programs were especially helpful for those who bought during the housing boom when prices were inflated. This is a very limited amount of homeowners when compared to the overall number of people who own a home. The need for refinancing for all at a time when mortgage rates are at record lows is obvious for those who do not fit into the eligibility criteria for the current special programs that are available.

In last week's State of the Union address, President Obama stated that "overlapping regulations are keeping responsible young families from buying their first home" and requested a streamlined process for mortgages in order to further help economic growth. The President stated that, at a time when mortgage rates are near a 50 year low, too many families who want to buy a home and have solid credit are rejected and too many who want to refinance are being denied even if they have never missed a payment.

The Menendez-Box bill was submitted last year in September 2012 and still has not passed. The legislation could help millions of American families refinance while Federal Reserve is keeping mortgage rates low. Last week, the bill was reintroduced again. Called the Responsible Homeowner Refinancing Act, the bill would streamline requirements for homeowners to refinance, similar to HARP and FHA streamline refinances. It would also extend the HARP program for an extra year through the end of 2014.

This week the Federal Housing Finance Agency (FHFA) released the November 2012 Refinance Report which shows that Fannie Mae and Freddie Mac have reached a new milestone with nearly 2 million HARP refinances. In November, approximately 130,000 homeowners refinanced through HARP making it the second highest volume month in 2012. Between January and November of 2012, approximately 1 million mortgages were refinanced through the HARP program. This alone was more than the volume of any single year since the inception of the program in 2009. According to the report, record low mortgage rates and enhancements to the program are responsible for the continued high volume of HARP loans.

Although many may think this move to refinancing for all is not necessary because home prices are increasing, this type of program would reach a larger volume of homeowners, increase business for the mortgage industry and get needed cash flowing into the economy. Lending guidelines remain strict at this time making it difficult for many homeowners to refinance no matter what their circumstances may be. Many homeowners have held their property for a long time and are not eligible for HARP because they are not underwater. Nevertheless, these same homeowners may have gone through a personal financial crisis, such as a job loss, but have continued to make their monthly mortgage payments. These are among the responsible homeowners that the bill is aimed at. The bill would provide reduced refinance fees, no cost appraisals and no need for employment and income verifications. It would provide a streamlined process similar to the FHA streamline refinance and it would not require outside appraisals similar to the HARP program.

At a time when economic growth is needed, passing of this bill will allow for millions of homeowners to refinance which, ultimately, will put more money in their pocket. This money is often spent for other necessities which leads to economic growth. Economic growth leads to more jobs which is currently needed. The job market has been improving, but still has a long way to go as too many people are still out of work. Jobless claims for the week ending February 9th fell to the lowest level since July 2008, according to the Labor Department. While this is good news, the unemployment rate is still too high. Steps, such as streamlined refinancing, should be taken to promote economic growth which is what is needed for a full economic recovery from the financial crisis that hit everyone several years ago.

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