Refinancing Expansion Pushed By White House Before Election

By Sari R. Updated on 9/10/2012

As an effort to showcase President Obama’s support for homeowners, the White House is encouraging the Senate to vote this week towards expanding government refinancing programs.  Either way, this is a smart move for Obama.  If Republicans are in support of the bill, the Obama Administration can claim that the bill has enough momentum to keep moving forward.  If Republicans don’t support the bill, however, Democrats will claim them as being unsympathetic regarding homeowners.    

Obama has been trying to reform refinancing for homeowners for the past year, and has done so with the changes made to the Home Affordable Refinance Program last October.  This new Senate bill would promise lenders that they wouldn’t have to take the loss on refinanced loans that default – even if those loans were not originated to Fannie Mae and Freddie Mac standards.

As of now, liability is only waived for bad loans if a lender refinances an already-existing loan, and many lenders don’t currently refinance loans if a mortgage is serviced by another bank.  This bill would eradicate this distinction. 

The Menendez-Boxer Bill is only part of what Obama has been pushing for in the past year.  Another measure that Obama wants would require Freddie and Fannie to cover closing costs if a borrower refinanced into a loan with less than a 20 year term.  An additional measure that Obama is striving for would let borrowers without loans backed by the government refinance into FHA mortgages. 

The only bill out of the three that has received Republican support is the Menendez-Boxer Bill.