WASHINGTON Senate Democrats will propose legislation as early as this week to extend a government program that aims to help homeowners with government-backed loans to refinance, according to aides on Capitol Hill.
The proposal would expand on a housing relief bill that Senators Robert Menendez and Barbara Boxer failed to gain traction on last year. The legislation aims to open the door to refinancing for more borrowers who owe more than their properties are worth.
More than 1.8 million borrowers have already won new loans through the Obama administration's Home Affordable Refinance Program that was enacted in 2009 to help borrowers with little or no equity in their homes. But coaxing Congress to tackle broader mortgage relief that was laid out by the president's State of the Union speech last year has been a tough sell.
The new bill would extend the life of HARP through 2014, according to aides. The program, which is currently set to expire this year, provides streamlined financing options for homeowners who are current on their payments and have loans owned or guaranteed by Fannie Mae and Freddie Mac, the two government-controlled companies that have been propped up by almost $190 billion in taxpayer aid.
The bill excludes a key piece of the White House initiative that would let homeowners refinance into loans backed by the Federal Housing Administration, the U.S. government mortgage insurer, even if their current loans are not backed by Fannie Mae and Freddie Mac.
Last year, Senate Democrats considered a few ideas, all backed by the Obama administration, that would make it easier for a wider range of underwater borrowers to rework their home loans into more favorable rates.
But those plans failed due to Republican resistance.
While analysts said a Democratic bill has some chance of clearing the Senate this year, it would have slim chances of winning approval in the Republican-controlled House.
"Enacting this refinancing legislation will be tough," wrote Jaret Seiberg, a senior policy analyst at Guggenheim Partners, in a note to clients. "We detect little support among House Republican leaders. So even if it can pass the Senate, it may well die in the House."
(Reporting by Margaret Chadbourn; Editing by Phil Berlowitz)