By Elizabeth Vlock
Secretary of Housing and Urban Development Shaun Donovan spoke before the Senate Committee on Banking, Housing, and Urban Affairs Tuesday to discuss a proposal that would allow borrowers, without Federal Housing Administration (FHA) or Government Sponsored Enterprises (GSEs), to access low-cost refinancing on their mortgages.
This proposed legislation is designed to create a more competitive housing market allowing borrowers, who meet certain criteria, to take advantage of the lowest interest rates in fifty years. Secretary Donovan’s proposal advocates for state funding to areas with high foreclosure rates to help borrowers rebuild equity.
Under the current system, millions of borrowers who have kept up with their mortgage payments are still subjected to high interest rates without the ability to refinance. This leaves responsible borrowers unable to take advantage of refinancing options that those who have GSE and FHA-backed loans have access to.
With some banks unwilling to assume the risks associated with allowing borrowers to refinance, many Americans are left without the opportunity for relief that those with government-backed loans can obtain. Donovan’s proposal intends to eliminate this disparity and save borrowers thousands of dollars a year.
“[It’s a] streamlined process designed to make it simpler and less expensive for borrowers and lenders to complete the refinance transaction,” Donovan said in his opening statement.
Sen. Robert Menendez (D-N.J.) is currently working on drafting legislation that is designed, “to remove the barriers preventing borrowers current on their payments from refinancing their loans.”