Merkley presses to step up homeowner refinancing

Oregon Sen. Jeff Merkley laid out a plan on Wednesday that would give homeowners who are underwater on their mortgages a chance to refinance into a lower interest rates. 

The Democrat, who sits on the Senate Banking Committee, unveiled a proposal that would let homeowners who owe more on mortgages than their homes are worth and who are current on their payments switch into 4 percent loans, a move he argues will boost the sputtering economy and further bolster the improving housing market. 

“There are millions of Americans trapped in high-interest mortgages, and that's not just bad for them, it's bad for neighborhoods hit by foreclosures and it's a huge anchor on our economy," Merkley said in an announcement across a swath of social media — YouTube, Twitter and Facebook.

"A bold solution to help these families refinance is the fastest way to get our economy back on track.”

Merkley said the plan, which he spent more than six months developing with experts, would create a new, temporary government-backed trust by selling bonds to raise funds to purchase mortgages issued by private lenders that meet the program's criteria.  

He said the program can be piloted immediately and would not need new legislation from Congress.  

The proposal envisions a role for the Federal Reserve, Federal Housing Administration, or other agency to create the new trust.

The plan is projected to turn a profit over its lifetime, Merkley said. 

He said that while the federal government acted quickly during the financial crisis in 2008, "we have not done not nearly enough for American families who are struggling with the downturn in the housing market.” 

The Oregon Democrat has wrapped up the support of economists and housing groups, including the National Association of Realtors. 

“Sen Merkley’s plan is a creative and bold effort to address the serious economic threat posed by millions of underwater homeowners,” said Mark Zandi, chief economist at Moody's Analytics. 

"Previous attempts to solve this problem have fallen well short. Sen. Merkley’s plan is an ambitious one, and should be carefully considered."