A bill introduced this week by U.S. Rep. Dennis Cardoza, D-Calif., would allow virtually any owner-occupant with a mortgage backed by Fannie Mae or Freddie Mac to refinance at today’s low rates — regardless of whether they are underwater or in default.
HR 6218, The Housing Opportunity and Mortgage Equity (HOME) Act, would affect up to 30 million mortgages held or backed by Fannie and Freddie, Cardoza said in a press release announcing the bill’s introduction.
Language in the bill would prohibit Fannie and Freddie from requiring appraisals of properties to be refinanced. Loans servicers would be paid fees of up to $1,000. Fees for refinancing would be rolled into the mortgage and penalties would be waived.
Supporters say the bill would help stabilize the housing market by decreasing the inventory of foreclosed homes and creating a floor for home prices, while creating additional disposable income for homeowners that would provide a direct economic stimulus.
Although HR 6218 has 16 co-sponsors, a similar bill introduced by Cardoza in January 2009 went nowhere. That bill, which mandated that the interest rate on refinanced loans be set at 4 percent, would have cost an estimated $100 billion or more.
The current bill would allow interest rates on refinanced mortgages to be set by the market. Fannie and Freddie would issue new mortgage-backed securities (MBS) to fund the refinanced, fixed-rate mortgages.
In an interview with McClatchy Newspapers, Cardoza acknowledged that without the Obama administration’s support, HR 6218 has little chance of passing this year. He said he’s prepared to reintroduce the bill next year.