Improving HARP 2 â€“ the Boxer-Menendez Bill
Will the third time be a charm? Following President Obama’s 2013 State of Union address and his appeal to streamline the refinance process, Senators Boxer (D-CA) and Menendez (D-NJ) reintroduced their HARP 2 Bill.
According to Sen. Boxer, their Bill, "S. 249, The Responsible Homeowner Refinancing Act of 2013, removes the barriers preventing these Fannie Mae and Freddie Mac borrowers from refinancing their loans at the lowest rate possible."
There is no doubt that the HARP 2 program has been successful in helping many underwater borrowers refinance at historically low rates. Since 2009 More than 2 million borrowers have refinanced using the HARP program. More than 1 million borrowers have refinanced under the HARP 2 program.
In order to see how you can benefit from the Boxer-Menendez Bill, learn:
- Why make changes to HARP 2?
- What are the proposed changes in the Boxer-Menendez Bill?
- Will the Boxer-Menendez Bill make a difference?
Why Make Changes to HARP 2?
In November 2011 the HARP program was changed allowing for unlimited LTVs and easier underwriting criteria, especially for loans refinanced by the original lender. In fact, the HARP 2 program produced good results. (More than 1 million borrowers refinance under the HARP 2 program in 2012).
So, if HARP 2 was so successful, why the changes? The Boxer-Menendez aims to reach more borrowers at lower prices by addressing these problems:
- Change HARP rule: Rules which favored the original lender/current servicer big banks have dominated the HARP refinance market and often either charge a higher price or set tougher requirements so that many borrowers do not qualify for the HARP loan.
- Stricter lender overlays: The Bill will eliminate lender’s risks (less representations and warranties.
The Boxer-Menendez Bill – What does it Offer?
The Boxer-Menendez Bill deals with Fannie Mae and Freddie Mac borrowers who fit into the general eligibility criteria of the HARP loan. The main goals of Sen. Bill S-249 (or The Responsible Homeowner Refinancing Act of 2013) are to improve on the HARP in the following manner:
- Extend the Program: The Boxer-Menendez Bill calls for the extension of the HARP program till the end of 2014 (instead of 2013)
- Level the Playing Field: Lower the risk for non-servicing (original lenders) by allowing them to use the same warranties and representations.
- Ease the Loan Requirements: By having the same criteria for all lenders, the Bill abolishes certain employment and income requirements, along with all loan-to-value criteria.
- Lower the Cost of the Loan: The Boxer-Menendez Bill cancels all Fannie Mae and Freddie Mac guarantee fees charged to the lender. The hope is that the lower fees will be passed on as lower costs for the borrower.
- More transparency: The Bill also requires the FHFA to provide information to potential borrowers, including tools where borrowers can determine their eligibility, a complete list of lenders, a mortgage refinance calculator, and tips on refinancing their loan.
Will the Boxer-Menendez Bill Make a Difference?
First of all, the Boxer-Menendez Bill is a partisan bill and therefore does not have much chance of passing both the Senate and the House of Representative.
However, even if it passes into law, it is not clear that lenders will want to relax their requirements and offer loans to any eligible Fannie Mae and Freddie Mac borrower. Lenders may still continue to implement stricter loan to value rations, debt to income ratio and credit scores.
In addition, the proposed Boxer-Menendez Bill does not offer any type of relief for those millions of underwater borrowers do not have Fannie Mae or Freddie Mac HARP eligible loans. The various HARP 3 proposals such as President Obama’s #myrefi mass refinance proposal or Sen. Merkley’s Rebuilding American Homeownership are also far away from being passed.
Here are some preliminary steps you should take to prepare yourself for a refinance.
- Check if your loan is HARP eligible. If so, then shop for a mortgage quote
- Keep updated about the HARP 2 mortgage and the HARP 3 mortgage.
- Make your mortgage payments on time. No matter which mortgage you take the lender will require that you make timely payments on your mortgage and your debt.
- Monitor your home value. If home values rise, then you might be eligible for a conventional refinance. Make sure that you prepare yourself to qualify for a mortgage refinance loan.