Merkley Introduces Bills to Help Middle Class Families with New Home Refinancing Options

WASHINGTON – Today, Oregon’s Senator Jeff Merkley introduced the Rebuilding American Homeownership Act to help middle class families by providing new refinancing options for homeowners. The bill would allow underwater homeowners who currently have no option to refinance to lock into a lower interest rate and reduce their monthly payments, putting more cash back in their pockets and increasing their chances of staying in their homes. 

Merkley also introduced the Rebuilding Equity Act, which would cover closing costs for underwater homeowners who refinance into shorter-term loans to rebuild their equity more quickly. 

  “As the President said yesterday, our top priority as a nation should be building and sustaining a strong middle class,” said Merkley. “Homeownership is the greatest wealth-building tool the middle class has ever known. But in the Great Recession, this wealth-building tool was turned upside down and exploited by predatory lenders, and now too many families are stuck underwater in high-interest loans. It shouldn’t matter which financial institution owns a loan – all responsible homeowners should have the option to refinance and save money. And when underwater homeowners decide to refinance into shorter-term loans to rebuild their equity more quickly, it’s a win for the family and for the community.” 

Well over one million families are still making payments on loans with interest rates over 6% with no option to refinance. That is because only loans backed by Fannie Mae or Freddie Mac are eligible for current refinance programs helping homeowners who are underwater, or owing more than their homes are worth. The Rebuilding American Homeownership Act would expand the Home Affordable Refinance Program (HARP) so that all underwater homeowners who are current on their loans have an option to refinance into a more affordable loan. 

The Rebuilding American Homeownership Act would modify HARP in the following ways: 

  • Allow loans that lack a government guarantee to be refinanced through HARP.
  • Direct the GSEs to price for the risk they would be assuming, so that the program has no net cost.
  • Establish an automatic sunset for this program after 24 or 36 months, much like the Home Owners’ Loan Corporation during the Great Depression.

The Rebuilding Equity Act would modify HARP to cover $1,000 in closing costs for underwater homeowners who choose loan terms of 20 years or less to rebuild equity in their homes more quickly. Both CBO and Fannie Mae have estimated that this bill would have no net cost, because it would reduce the severity of financial loss when defaults do occur.