Push intensifies to pass home-loan refinancing bill

A leading economist says Congress needs to act fast on refinancing legislation to help the most homeowners and give the improving housing market a boost.

Mark Zandi, chief economist with Moody's Analytics, told a Senate panel Thursday that he supports a measure to eliminate hurdles for homeowners to refinance into lower interest rates under the Home Affordable Refinance Program (HARP), and suggested that lawmakers settle remaining differences and pass a bill soon. 

"I'll error on the side of being parsimonious, but we're really close to generating a lot of refinancings," he told the Senate Banking Committee. 

"You need to move fast."

Zandi told the panel that even if policymakers fail to act, the revamped HARP program could still lead to 2 million to 3 million more refinancings that would bolster the gradually improving housing market. 

Still, the Democratically sponsored legislation would help reach more homeowners, especially those who are underwater on the loans and are current on their payments, he said.

The panel hasn't set a time yet to mark up the legislation, but there seems to be agreement among Republicans and Democrats to move the bill through the panel. 

Zandi's remarks echo those of Housing Secretary Shaun Donovan to pass the bill authored by Democratic Sens. Robert Menendez (N.J.) and Barbara Boxer (Calif.) to remove those barriers and expand refinancing opportunities, part of President Obama's congressional to-do list. 

Donovan has said it would be wise to pass a bill now, while mortgage rates are low; if they begin to rise, it would negate the effects of helping homeowners and giving them the extra pocket money they need. 

"There’s a real urgency here because interest rates today are at the lowest level they have ever been for a 30–year mortgage," he said recently. "But as the economy continues to improve, the expectations are this window of record low interest rates may not last for a long time."

Several other Senate Democrats are working on legislation that would tackle various barriers to refinancing, including expanding refinancing to allow underwater borrowers whose loans are not government-backed to refinance into new mortgages with the Federal Housing Administration (FHA) and apply their savings into rebuilding their equity. 

Another bill would provide refinancing for homeowners with loans on their primary residence that aren't backed by the FHA or Fannie or Freddie, opening up refinancing to 3.5 million homeowners. 

In October, Obama administration officials revamped HARP and the Federal Housing Finance Agency, the independent agency overseeing Fannie Mae and Freddie Mac, unveiled a set of changes to the program in January, including allowing borrowers to qualify no matter how much their loans exceed the value of their homes, waiving some fees and promising lenders a break from the warranties they sign when they originate certain loans.

The effect of those changes, especially those from last fall, which went into effect in March for most lenders, is unclear. 

So far, the largest mortgage servicers said they received 750,000 applications for the updated program, known as HARP 2.0, Donovan said.