Barbara Boxer, a democrat from California, has teamed up with Johnny Isakson of Georgia to introduce a bill to Congress that would require Fannie Mae and Freddie Mac to allow homeowners whose homes are now worth less than their original mortgage, a refinancing option.
What Will This Mean?
While it might sound somewhat unbelievable this late in the foreclosure and mortgage modification game, both Freddie and Fannie, who were seized by the government previously, have not been forced to go along with government loan modification incentives. And this isn’t a small problem: of nearly 27.5 million mortgages that either Freddie Mac or Fannie Mae guaranteed, more than 8 million have an interest rate at or above 6 percent. With houses that are experiencing negative worth, this interest rate is crushing to many people who are struggling with either a first or a second mortgage. The bill would allow homeowners who have mortgages through Freddie or Fannie to refinance during a time when interest rates are at historic lows.
There is no strong push against the bill at the moment, though many experts have brought up the fact that the bill will have marginal impact unless the lenders are given indemnity from what’s known as a ‘putback,’ or being forced to purchase a debt from loans gone sour. Whether this will be addressed remains to be seen, but it is good to see the government taking a definite step on the matter. Be sure to follow the news to see the progression of this bill through the Senate and the House – it will be interesting to see the changes brought on the bill throughout the debates.