If you're like most American homeowners, you're probably trying to find a way to qualify for a refinance deal under today's best mortgage rates. However, many homeowners have struggled to maintain their home equity in a real estate market that has forced some property values "underwater." As a result, over a third of the mortgage loans guaranteed by Fannie Mae and Freddie Mac bear interest rates well above the current average.
Despite federal programs that encourage banks to adjust home prices during a refinance, many mortgage lenders refuse to discuss loan modification programs until borrowers have missed at least a few of their monthly payments. By that point, banks may be more willing to take a property into foreclosure rather than invest the energy into appraisals and negotiation.
Loan modification made easier
In an attempt to address this problem, California Senator Barbara Boxer has introduced a new bill designed to make the loan modification process easier and more attractive to both mortgage lenders and borrowers. Called the Helping Responsible Homeowners Act of 2011, the bill would allow more consumers to qualify for home refinance deals without suffering through the stress of withholding payments to mortgage lenders. Taking consumer advocacy a step, Boxer's bill requires lenders to offer today's mortgage rates to borrowers, regardless of whether they have experienced a drop in home value.
At present, many banks and mortgage brokers reserve the best mortgage rates for customers who have maintained roughly the same amount of home equity over the past few years. The HRHA would give underwater borrowers a chance to bring their interest rates in line with market trends, potentially saving them thousands of dollars a year that could be applied to principal or to household budgets.
Bill targets high fees, upfront charges
In addition, Boxer takes aim at some of the high fees mortgage brokers and lenders charge to initiate refinance deals when homes have lost value. Citing that government-sponsored entities Freddie Mac and Fannie Mae already bear the bulk of the risk involved in a home refinance deal, the HRHA intends to eliminate upfront fees.
With partisan politics looming large in Congress, Boxer's proposal may result in little more than increased dialogue between lenders, lawmakers, and regulators. In the meantime, you can request free mortgage quotes from lenders and brokers with histories of refinancing during down markets. Despite daily fluctuations, refinance rates look to remain relatively stable until the economy shows marked signs of faster recovery.