Senators from both sides of the isle have sent a letter to the Obama administration calling for the elimination of loan-to-value requirements on refinances. But that’s not all they are asking for.
Twelve Democrats and four Republicans signed the letter addressed to Department of Housing and Urban Development Secretary Shaun Donovan, Treasury Department Secretary Timothy Geithner, National Economic Council Director Gene Sperling, and Federal Housing Finance Agency Acting Director Edward DeMarco.
The letter referenced Obama’s comments in a speech last month indicating he would work with federal housing agencies to help more borrowers refinance — a move which could leave borrower households with $2,000 more a year in cash.
The bipartisan coalition highlighted existing Senate legislation that would remove LTV limits, a move that “would provide the most at-risk borrowers an alternative to simply walking away from their mortgage.”
The legislators also brought up Senate legislation that would eliminate loan-level price adjustments on refinances since such up-front, risk-based fees make refinances less affordable and reduce the benefit to the borrowers. In addition, Fannie Mae and Freddie Mac already bear the risk on the loans.
Legislation is also on the table to ensure that second-lien holders don’t hinder first-mortgage refinances.
But the group doesn’t want to wait for their legislation to possibly find its way to the president’s desk.
“All of these changes can be accomplished administratively and we urge that you take immediate steps to do so,” the letter said. “We also support efforts to address other hurdles that have limited the success of current refinance programs, including representations and warranties, mortgage insurance, and high lender origination fees.”
The senators estimate that nearly 19 million loans owned or managed by Fannie and Freddie have interest rates above 5 percent and could benefit from today’s lower rates. They called for swift action before rates eventually rise.