The Obama administration continued pressure on Congress Thursday to pass three bills that would help more creditworthy underwater borrowers refinance.
"It's going to be a real fight to get this done," said Department of Housing and Urban Development Secretary Shaun Donovan during a Google "hangout" with borrowers. "This is something that ought to go beyond politics. In the past we had Democrats and Republicans support things like this."
More than 11.4 million borrowers owe more on their mortgage than their home is worth, according to CoreLogic (CLGX). Although that number declined from the end of last year, home prices remain unsteady. Many waiting for the market to naturally return equity to their home face years of negative equity.
Donovan pitched three bills the administration is focusing on.
The first from Sens. Robert Menendez, D-N.J., and Barbara Boxer, D-Calif., would expand the Home Affordable Refinance Program once again. Some Senate Republicans may be on board. The Federal Housing Finance Agency removed some hurdles to the program last year including the cap on loan-to-value ratios, some appraisal requirements and repurchase risk on the old loan.
The result was a sharp increase in HARP refinancing beginning in March, but some borrowers are still left out, particularly those whose servicers do not participate in the program because of the remaining buyback risk.
The Menendez-Boxer bill would strip out all repurchase risk for Fannie Mae and Freddie Mac loans refinanced through the program and it would waive appraisal requirements for the remaining loans that still require it.
It also extends the HARP cut-off deadline to borrowers whose mortgage was originated before June 2010. As of now, only borrowers with loans taken out before June 2009 can qualify.
A second bill from Sen. Dianne Feinstein, D-Calif., introduced in May, would allow refinancing for underwater borrowers holding mortgages backed by the Federal Housing Administration. It creates a $6 billion fund to insure the new loans.
Donovan mentioned a third bill from Sen. Jeff Merkley, D-Ore., would allow borrowers to refinance under HARP and rebuild equity in their home a bit faster.
If it is passed, a borrower could refinance into a 20-year loan term or shorter, and Fannie or Freddie would cover the closing costs. Keeping the monthly payment the same, a borrower would then be able to rebuild equity faster.
Donovan said this option is still available to borrowers under the expanded HARP, but under the bill, the closing costs are covered.
Jaret Seiberg, a policy analyst at Guggenheim Partners, said these bills stand little chance of making it to Obama's desk this year. Odds are highest for getting the Menendez-Boxer bill passed but much lower for the others. The Feinstein bill especially would be difficult given the still fragile state of the FHA emergency insurance fund.
"We see that as a poison pill designed to sink the entire package," Seiberg said.
Donovan said the administration will continue to push the bills through in order to give some relief to struggling borrowers.
"Everyone here is still paying their mortgage," Donovan said of the homeowners asking him questions over Google. "They're meeting their responsibility. The president believes that we should give every one of them the ability to refinance into a lower-rate mortgage."