WASHINGTON (Reuters) - Senate Democrats on Tuesday tried to drum up support for widening a government program that aims to help homeowners with government-backed loans to refinance.
Although Democrats have expressed a desire to open the door to refinancing for more borrowers who owe more than their properties are worth, lawmakers have held back from writing a bill. Republicans remain leery of broad-based housing relief programs that could be costly to the government.
Foreclosure prevention and job creation topped an election-year “to do” list that President Barack Obama laid out for Congress on Tuesday, part of an effort to cast Republicans as standing in the way of his efforts to spur the economy.
About 1.1 million borrowers have refinanced through the Obama administration’s Home Affordable Refinance Program, which was enacted in 2009 to help borrowers with little or no equity in their homes. But convincing Congress to agree to added mortgage relief has been a tough sell for the White House.
Senator Robert Menendez, a New Jersey Democrat, circulated proposed changes to the current housing program, HARP, during a Senate Banking Committee hearing on Tuesday. Senator Barbara Boxer, a California Democrat, is a co-sponsor of the draft bill, which would implement some proposals Obama unveiled in his State of the Union address in January.
The draft bill would provide 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 more than $150 billion in taxpayer aid.
However, it excludes a key piece of the White House plan 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.
More than 17.5 million borrowers with loans backed by Fannie Mae and Freddie Mac currently pay more than 5 percent interest could be reached, according to the draft, while mortgage rates are averaging under 4 percent currently nationwide. Many of those borrowers have been unable to access government initiatives such as HARP.
“I think there are some redeeming qualities to the Menendez bill. There are also some things that I think certainly need to be changed,” said Senator Bob Corker, a Tennessee Republican.
While lawmakers continue to bat about ideas for speeding a recovery in the lackluster U.S. housing market, little action is expected this year in the face of presidential and congressional elections. Although a Democratic bill could go to the Senate floor for a vote, analysts expect it would have slim chances of winning approval in the Republican-controlled House.
At a committee hearing, U.S. Secretary of Housing and Urban Development Shaun Donovan endorsed the Democratic effort to encourage refinancing, citing the need to help homeowners take advantage of historically low interest rates and put more cash back into the economy.
“Significant changes have been made to HARP to improve access, but additional changes can be made to increase participation and improve its effectiveness,” Donovan said. “That’s something I hope we can all work on, with speed, and get this done.”
He estimated that “millions of homeowners” would benefit from the Menendez-Boxer plan, but he declined to be more specific.
Reporting by Margaret Chadbourn; Editing by Jackie Frank