A proposed Senate bill would extend a government refinance program to all paying Fannie Mae and Freddie Mac borrowers, regardless of loan-to-value ratio.

The bill, sponsored by Sens. Robert Menendez, D-N.J., and Barbara Boxer, D-Calif., would remove a minimum requirement for mortgage LTV through the Home Affordable Refinance Program.

Recent changes removed a ceiling on LTV to allow more underwater borrowers to refinance, but left in an 80% LTV floor for Fannie and Freddie loans.

“Our bill would make it easier for homeowners to refinance and lower their mortgage payments, which is a popular and common sense way to help the housing market,” Menendez said in a Senate Banking Committee early Tuesday.  The bill, he said, could help 17.5 million Fannie and Freddie borrowers with an interest rate above 5%.

The measure also extends the pool of eligible mortgages by a year, pushing the cutoff date for loans originated to May 31, 2010. Mortgage rates have since fallen to all-time lows below 4% for 30-year, fixed-rate mortgages.

Few expect a huge amount of action on the mortgage front in Congress in an election year and with the House and Senate under split party leadership. Sen. Bob Corker, R-Tenn., said there are “redeeming qualities” to the bill but needs changes, according to Reuters.

Among other changes, the bill would extend further streamlining measures for refinancing, including introducing alternatives to manual appraisals and eliminating employment and income verification requirements. Taxpayers, after all, “already own the risk of these loans,” according to a draft of the bill.

The draft also includes a provision under which second lienholders who “unreasonably block” a refinancing would have to pay “restitution” to affected taxpayers.



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