Today, Oregon's Senator Jeff Merkley introduced the Rebuilding Equity Act, a bill that will lower costs for some homeowners seeking to refinance through the Home Affordable Refinance Program (HARP). Under this bill, if homeowners who are current on their mortgage seek to refinance into a 20-year loan term or shorter, Fannie Mae or Freddie Mac will cover the closing costs, a benefit averaging $3,000 per homeowner. In addition, families will benefit from substantially lower interest payments due to today's record-low interest rates.
"This is simple," Merkley said. "If homeowners keep paying the same monthly payment on a shorter mortgage when they refinance, they'll be back above water more quickly. A majority of Oregon families that choose to refinance through this option will regain equity in their homes within 5 years. A pathway that puts America's families back above water is great for the families and great for the economy."
To be eligible, a homeowner must agree to refinance into a loan with no more than 20-year term, with monthly payments roughly equal to those they make under their current loan. For borrowers who agree to these terms, Fannie Mae or Freddie Mac will pay their closing costs, which include application fees, credit check costs, title search costs, and attorney's fees associated with closing the transaction.
The Rebuilding Equity Act is based on a concept introduced by President Obama in his State of the Union address in January.