New House bill would clear refinancing on 30 million GSE mortgages
A new bill before the House of Representatives aims to allow up to 30 million homeowners with mortgages held or backed by Fannie Mae and Freddie Mac to refinance with rates locked in at the current historical lows. Rep. Dennis Cardoza, D-Calif., who introduce the bill, said it will "help stabilize the housing market by decreasing the inventory of foreclosed homes and reducing declines in property values from issues surrounding blight and abandonment." He also expects the refinancings to afford those with mortgages backed by Fannie and Freddie "additional disposable income, providing a direct economic stimulus." Eligible mortgagees will be able to refinance almost without penalty regardless of income levels, credit history or loan-to-value ratio, Cardoza told Reuters earlier Tuesday. Fannie and Freddie would issue new mortgage-backed securities to fund the refinanced mortgages, using proceeds to pay off existing mortgages. Cardoza said the GSEs would "receive the same cash flow to cover default risk that they do now, passing along the reductions in financing costs to borrower." "None of the administration’s current housing programs have been far-reaching enough to make a dent in the worst foreclosure crisis in U.S. history," Cardoza said. "Until we see a program that cuts to the heart of the recession, we will continue to see little growth in our economy, families losing their homes and lifetime investments with lost equity." Cardoza initially introduced the Housing Opportunity and Mortgage Equity Act in January 2009. Today's bill has been modified to reflect changes made after the congressman met with the House Financial Services Committee and leading economists, including Christopher Mayer, senior vice dean of the Columbia Business School and Mark Zandi, chief economist for Moody’s Analytics. "With mortgage rates near record lows, the quickest and most effective way policymakers can help the economy is to facilitate more mortgage refinancings," Zandi said. Write to Jason Philyaw.