H. R. 6428
IN THE HOUSE OF REPRESENTATIVES
September 14, 2012
Mr. Welch (for himself and Mr. Costa) introduced the following bill; which was referred to the Committee on Financial Services
To provide for the expansion of affordable refinancing of mortgages held by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.
This Act may be cited as the
Responsible Homeowner Refinancing Act
In this Act—
the term current borrower means a mortgagor who is current on the subject mortgage at the time of the refinancing, and has had no late payments in the preceding 6 months and not more than 1 late payment in the preceding 12 months;
the term eligible mortgage means any mortgage that—
is an existing first mortgage that was made for purchase of, or refinancing of another first mortgage on, a 1- to 4-family dwelling, including a condominium or a share in a cooperative ownership housing association;
was originated or refinanced on or before May 31, 2009, unless that date is extended by the Director under FHFA’s preexisting authority to do so;
is owned or guaranteed by an enterprise;
with respect to which, the mortgagor is a current borrower; and
includes existing first mortgages with a loan-to-value ratio of less than 80 percent.
the term enterprise means the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation;
the terms FHFA and Director mean the Federal Housing Finance Agency and the Director thereof, respectively;
the terms Home Affordable Refinance Program and Program mean the Home Affordable Refinance Program, administered by the FHFA and the enterprises as part of the Making Home Affordable initiative announced on March 4, 2009;
LTV means loan-to-value, or the ratio of the amount of the primary mortgage on a property to the value of that property; and
CLTV means combined loan-to-value, or the ratio of all mortgage debt on a property to the value of the property;
the term same servicer means a lender that is providing refinancing for a borrower whose loan they already service;
the term qualified lender means a lender that is participating in the Program;
the term guarantee fee has the same meaning as in section 1327(a) of the Housing and Community Development Act of 1992 (12 U.S.C. 4547(a)); and
the term average fees means the average contractual fee rate of single-family guaranty arrangements charged by an enterprise on April 1, 2012, plus the recognition of any up-front cash payments over an estimated average life, expressed in terms of basis points, such definition to be interpreted in a manner consistent with the annual report on guarantee fees by the FHFA.
Streamlined refinancing criteria under the program
In carrying out the Home Affordable Refinance Program, each enterprise shall adopt and adhere to the criteria established under this section.
The enterprises shall include as eligible borrowers in the Home Affordable Refinance Program all current borrowers who have an eligible mortgage and meet those underwriting requirements for eligibility for same servicer refinancing in the Program as of March 1, 2012, except that the enterprises may not disqualify or impose varying rules within the Program for borrowers based on LTV, CLTV, employment status or income.
Additional relief from representations and warranties
The enterprises shall not require of any qualified lender executing a loan under the Program any representations or warranties—
for the value, marketability, condition, or property type of the loan, as such loan characteristics are evidenced by an appraisal or alternative valuation method, provided that the lender complies with the enterprises’ required methods and standards for ordering an appraisal under the Program; or
that are not required of same servicers under the Program as of March 1, 2012, whether that loan is manually underwritten or underwritten through an automated system, except that, under no circumstances shall greater representations and warranties be required for a loan that is manually underwritten than for one that is underwritten through an automated system.
Prohibition on up-Front fees
In carrying out the Program, the enterprises may not charge the qualified lender any loan level price adjustment, post settlement delivery fee, adverse delivery charge, or other similar up-front fee.
The enterprises shall develop and allow alternative streamlined methods to determine the value of the property for which refinancing is sought through the Program that eliminate the costs to the borrower and qualified lender associated with such determination. Until such time as such method is developed, and when the existing automated valuation models of the enterprises are unable to determine the value of a certain property for which refinancing is sought through the Program, the enterprises shall bear the costs associated with the use of manual appraisal of that property, without passing on such costs to the borrower or qualified lender.
Notwithstanding any provision of the Federal National Mortgage Association Charter Act (12 U.S.C. 1716 et seq.) or the Federal Home Loan Mortgage Corporation Act (12 U.S.C. 1451 et seq.), an enterprise may purchase or guarantee any new mortgage resulting from the refinancing of an eligible mortgage pursuant to this section, if at the time of origination of the eligible mortgage, the eligible mortgage complied with the applicable limitation governing the maximum original principal obligation on conventional mortgages that may be purchased or guaranteed by that enterprise.
On each mortgage refinanced under the Program in accordance with this section, the enterprises shall set the average fee required under this Act, as determined by the Director in an amount not less than the average fees charged by the enterprises as of April 1, 2012, for such guarantees. The Director shall prohibit an enterprise from offsetting the cost of the fee to the mortgage originators, borrowers, and investors by decreasing other charges, fees, or premiums, or in any other manner.
Authority to limit offer of guarantee
The Director shall prohibit an enterprise from consummating any offer for a guarantee to a qualified lender for mortgage-backed securities, if the guarantee is inconsistent with the requirements of this section.
Information collection and analysis
The Director shall require each enterprise to provide to the Director, as part of its annual report submitted to Congress, for loans refinanced under the Program—
a description of changes made to up-front fees and annual fees as part of the guarantee fees negotiated with qualified lenders; and
an assessment of how the changes in the guarantee fees described in subparagraph (A) met the requirements of paragraph (1).
Not later than 30 days after the date of enactment of this Act, the Director shall issue any regulations or guidance necessary to carry out the changes to the Program established under this section, which regulations or guidance shall be put into effect not later than 90 days after the date of enactment of this Act.
The requirements of this section shall expire concurrent with the expiration of the Program.
Rule of construction
Nothing in this section shall be construed to supersede, preempt, or otherwise nullify the requirement that a loan refinanced under the Program must benefit the borrower.
For purposes of paragraph (1), a loan refinanced under the Program benefits the borrower, if the refinanced loan results in—
reduction in payment;
reduction in interest rate;
movement to a more stable product, such as from an adjustable rate mortgage to a fixed rate mortgage; or
reduction in amortization term.
Information for borrowers on eligibility for the Program
Notice to borrowers
Not later than 60 days after the date of enactment of this Act, the enterprises shall notify all borrowers with a mortgage owned or guaranteed by an enterprise about the Program and its eligibility criteria, and inform borrowers of the website required under subsection (b).
Public access to eligibility criteria
The Director shall establish, and the enterprises shall display a link on their homepages to, a single website where borrowers may—
determine their potential eligibility for participation in the Program;
see a complete list of and links to qualified lenders;
use a mortgage refinance calculator to calculate potential payment savings based on different interest rates; and
obtain tips on refinancing their loan.
Consistent refinancing guidelines required
Not later than 60 days after the date of enactment of this Act, the Director shall issue guidance to require the enterprises to make their refinancing guidelines consistent to ease the compliance requirements of qualified lenders, and in particular with respect to loans with less than an 80 percent loan-to-value ratio and closing cost policies of the enterprises, which regulations or guidance shall be put into effect not later than 90 days after the date of enactment of this Act.
The Director shall provide to Congress monthly reports on the progress of the Program, and each enterprise shall include and disclose, as part of its filings with the Securities and Exchange Commission on Form 10–Q, Form 10–K, or any successors thereto, detailed information on each enterprise’s progress and results in implementing and executing the Program.
If any portion of this Act or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect the portions or applications of this Act which can be given effect without the invalid portion or application.