Appraisal costs would be eliminated in a proposed bill that would give homeowners with mortgages held by Fannie or Freddie and who have equity in their homes the same opportunity to refinance through the Home Affordable Refinance Program as those with underwater mortgages, Mortgage News Daily reported Sept. 11.
The Responsible Homeowner Refinancing Act, sponsored by Sens. Robert Menendez, D-N.J., and Barbara Boxer, D-Calif., would extend guidelines and reduce fees under HARP for homeowners regardless of the loan-to-value ratio of their current loan held or owned by the government-sponsored enterprises.
Homeowners would have to be current on their mortgages in order to qualify for the bill, which would:
Eliminate appraisal costs for all borrowers.
Borrowers who live in communities without a substantial number of recent home sales often have been prevented from using the Automated Valuation Models typically used by the GSEs and therefore have to pay for a manual appraisal to refinance. The proposed bill would require the GSEs to develop additional streamlined alternatives to manual appraisals, Mortgage News Daily reported.
Remove barriers to competition.
The bill proposes to eliminate the different standards that exist for lenders currently servicing a loan than for new lenders, and calls for stricter underwriting criteria and greater risks from the GSEs’ reps and warranties. The legislation would direct the GSEs to require equalizing the underwriting and associated reps and warranties between existing and new lenders so borrowers would get more competitive pricing and more favorable loans terms.
Guarantee access to streamlined refinancing for all GSE borrowers.
The bill would allow lenders to offer a single, streamlined program to all GSE borrowers rather than continuing to distinguish between borrowers with LTVs above 80 percent and those below. Borrowers with greater equity have endured greater costs and administrative burdens that basically have locked them out of HARP, Mortgage News Daily reported.
Eliminate upfront fees on refinancings.
Enhancements to HARP earlier this year lowered or completely eliminated some fees for HARP loans, creating what the sponsors called an economically indefensible situation where borrowers with significant equity have faced steeper costs for refinancing than borrowers with no equity, Mortgage News Daily reported. These additional fees can be as high as 2 percent of the loan amount. The bill would prohibit the GSEs from charging upfront fees to refinance any loan they already guarantee.
Streamline the refinancing application process.
The bill proposes the elimination of employment and income verification requirements. According to Mortgage News Daily, the sponsors felt there’s no reason to require proof of employment or income for such loans since participation in HARP already requires borrowers to be current and have a history of timely payments, and the GSEs already own the risk.
“Passing this bill will get rid of the red tape that leaves millions of borrowers trapped in higher interest loans, puts money back into the pockets of middle class families, and strengthens our economy,” Menendez said, Mortgage News Daily reported.