Analysis: Obama's election-year housing push shows a pulse
WASHINGTON (Reuters) - Barack Obama's election-year "to do" list for Congress appears likely to largely fall victim to partisan sniping, but one element - mortgage relief - is showing a pulse.
Republicans and Democrats in the Senate have both expressed interest in a bill that could make it easier for millions of Americans to refinance home loans, although they are circling each other warily as they try to determine their first steps.
"This is the one chance Washington could show the country that they can throw blue and red out the window," said Jason Gold, a senior fellow at the Progressive Policy Institute, a left-leaning think tank. "There is hardly a congressional district out there that would not see at least 10,000 households benefit. It's a win."
The bill would make it easier for borrowers with loans backed by Fannie Mae and Freddie Mac to refinance by allowing them to seek out a new loan servicer and by easing loan-to-value restrictions.
It would build on the government's main refinance initiative - the Home Affordable Refinance Program - which was widened last year to reach homeowners who owe more on their mortgages than their homes are worth but who are current on their payments.
The legislation aims to reach some of the more than 17.5 million U.S. homeowners who pay more than 5 percent interest on their Fannie- or Freddie-backed loans. Rates on new mortgages are currently at record lows below 4 percent.
It would go beyond HARP by preventing the two government-controlled mortgage firms from charging certain risk-based fees and by eliminating extra appraisal costs.
READING THE TEA LEAVES
While the politics could align in the Democrat-led Senate, legislation would face a tougher road in the Republican-controlled House of Representatives. Many Republicans are leery of housing relief programs that could be costly for taxpayers.
Even in the Senate, there are significant procedural hurdles and little time left on the legislative calendar. "It has a pulse, but it's far from certain that it will get done," said Brian Gardner, an analyst at Keefe, Bruyette & Woods.
Senate Banking Committee Chairman Tim Johnson is worried Republicans will try to load up the draft bill with unrelated provisions, an issue he wants resolved before the committee holds a bill-writing session.
"We have worked together in the past markups to keep amendments to those related to the underlying bill," Johnson said last week. "I hope that my colleagues will agree to continue this approach."
But Senator Richard Shelby, the committee's top Republican, wants Johnson to permit any provision on housing finance to be considered as an amendment.
"Senator Shelby wants to work with Chairman Johnson and Senate Democrats to see whether we can reach an agreement on housing legislation. Making that determination requires a deliberative process. It starts with an open markup," Shelby spokesman Jonathan Graffeo said.
The panel would work off a bill introduced by Democrats Robert Menendez and Barbara Boxer.
In addition to making it easier to qualify for refinancing, the bill would limit the risk a lender might be required by Fannie Mae or Freddie Mac to buy back a mortgage if the underwriting is found to be faulty - a provision that could encourage lender participation.
"There's the root of a good idea in this bill. Done the right way, it would be helpful," Senator Bob Corker, a Republican on the banking panel, told Reuters. "I've told the chairman that if we do have a markup that I would only have amendments to the actual underlying text."
Mark Zandi, chief economist at Moody's Analytics, estimates that, combined with other government refinancing initiatives, the bill would result in about 2 or 3 million borrowers winning new loans, helping households save as much as $7 billion annually in mortgage payments. So far, around 1.2 million homeowners have refinanced through HARP.
Senate lawmakers are aiming to find an agreement that could lead to Senate passage before the congressional August recess.
What would happen next is unclear.
Gardner said it was unlikely the House would be willing to take up the Senate bill. In his view, a majority of House members would not see any political advantage to an up or down vote on the measure.
In that case, they would have to start drafting their own legislation from scratch for any hope of an eventual compromise measure emerging.