By Vicki Needham - 02/13/13 03:05 AM EST
President Obama on Tuesday cited legislation crafted by a Senate Democrat embroiled in an ethics controversy during his State of the Union address.
In the speech, Obama pressed Congress to let responsible homeowners refinance their loans into lower interest rates to provide a boost to the housing market's recovery and push along the broader economic recovery.
The Menendez-Boxer bill, which would streamline refinancing for Fannie Mae and Freddie Mac borrowers, had been expected to come up in November. But the Senate never picked up the measure as negotiations over amendments in the Senate Banking Committee broke down amid other pressing lame-duck issues.
The president's proposal goes one step further than the Menendez-Boxer bill by giving homeowners without government loans an avenue to refinance.
"It’s time that Congress finally put families first and give homeowners who have played by the rules a fair chance to refinance at today’s low rates," said Menendez, who is facing a Senate Ethics Committee investigation into allegations of misconduct.
Calls for Menendez to step down from the Senate Foreign Relations Committee intensified last weekend over his relationship with an eye surgeon, Dr. Salomon Melgen, from West Palm Beach who has been a big contributor to the senator.
Obama asked "what are we waiting for?" saying that Democrats and Republicans have supported it before.
"Take a vote, and send me that bill," he said, without citing Menendez or Boxer by name.
"Right now, overlapping regulations keep responsible young families from buying their first home. What’s holding us back? Let’s streamline the process, and help our economy grow."
Obama recycled his call from last year for Congress to pass a bill that would help some homeowners save upward of $3,000 a year by letting them refinance into record-low interest rates.
For borrowers with loans insured by Fannie Mae or Freddie Mac, the plan would eliminate appraisal costs, provide competition between lenders to make sure borrowers get the best deal and eliminate closing costs for those who use their savings to rebuild equity.
"Home prices are rising at the fastest pace in six years, home purchases are up nearly 50 percent and construction is expanding again," Obama said Tuesday night.
"But even with mortgage rates near a 50-year low, too many families with solid credit who want to buy a home are being rejected. Too many families who have never missed a payment and want to refinance are being told no," he said.
He argued that stalling refinancing is "holding our entire economy back, and we need to fix it."
The current average interest rate for a 30-year mortgage is 3.53 percent, near a historic low.
Nevertheless, there are nearly 12 million homeowners with loans guaranteed by Fannie Mae and Freddie Mac who could benefit from refinancing.
“Homeowners will have more money in their pockets, Fannie and Freddie will see fewer foreclosures, and the housing market and economy will continue building momentum," Boxer said.
"That’s why the Menendez-Boxer bill has such broad support from industry and consumer groups. We should take action on this common-sense plan immediately while interest rates remain low so American families can realize major savings.”
This story has been updated to clarify how the president's proposal differs from the Mendendez-Boxer bill.