While Baton Rouge has not suffered the worst of the residential foreclosure crisis, we have certainly felt the lingering effects of the recession. The economic recovery is slow in coming, and that means that some Louisiana families are just barely making ends meet. A lower house payment would be a big help, but, for a number of reasons, refinancing has eluded these families.
They are not alone. If their loans are guaranteed by Fannie Mae or Freddie Mac, they are, in fact, among the 12 million homeowners nationwide that could benefit from refinancing but that have not been able to get over the hurdles of red tape and high fees. These homeowners are not delinquent with their payments; they have managed to keep up with their obligations even during the hard times. But they are stretched to their breaking point.
Mortgage rates are hitting historic lows right now, but the rules and fees have kept homeowners from refinancing at the more favorable interest rates. The rules that apply to lenders have kept them, too, from helping homeowners, so fewer lenders participate in federal refinancing programs. The lack of competition means higher fees and less favorable rates for the borrower.
The U.S. Senate will soon be taking up a bill that would change all that. The bill would break down the barriers faced by borrowers who are not underwater on their mortgages and give them the same access to refinancing that people who are underwater have. But streamlining the process only goes so far: Fees would also come down under the proposed law. The bill would also eliminate appraisal costs for all borrowers.
For lenders, the bill would reduce some of the red tape that keeps competition low. The more lenders in the business, the better for homeowners. Finally, the bill would extend the federal government's current refinancing program for another year to ensure that all homeowners who need to reduce their payments have a chance to apply.
Right now, no hearings are scheduled for the measure.
Source: National Mortgage Professional, "Sens. Menendez and Boxer Push For Bill to Further Aid Refis," Feb. 8, 2013
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