California lawmaker's bill would help homeowners refinance

WASHINGTON — Taxpayers would help financially strapped homeowners refinance their mortgages at lower interest rates under a familiar-looking bill introduced Tuesday by Rep. Dennis Cardoza, D-Merced.

Citing the San Joaquin Valley's ongoing housing crisis, Cardoza revised a similar mortgage assistance bill he authored last year. The concept remains the same: The federal government would assist homeowners in lowering their mortgage interest.

"It's time the administration pays attention to Main Street America that's been devastated by this economic crisis," Cardoza said.

The bill potentially would extend to an estimated 30 million mortgages owned or guaranteed by Fannie Mae or Freddie Mac. The two government-sponsored enterprises would essentially let every mortgage holder refinance to current interest rates. For a fixed, 30-year mortgage, this is about 4.3 percent.

Fannie Mae and Freddie Mac would issue new mortgage-backed securities to pay off the existing mortgage-based securities.

A formal cost estimate has not yet been prepared by the Congressional Budget Office. Cardoza predicted that the bill would save the government money over time, as mortgage interest deductions decline because of the refinancing.

A similar bill introduced in January 2009, when interest rates were higher, was estimated to cost $100 billion or more. The earlier bill would have set all of the newly refinanced mortgages at 4 percent. Cardoza said his revised program introduced Tuesday "costs a heck of a lot less" that the original proposal.

For individual homeowners, the savings could prove considerable.

A 30-year, fixed $250,000 mortgage at 7 percent interest would require monthly payments of $1,663. The same mortgage at 4.3 percent interest would require monthly payments of $1,237.

"It's a big deal, and it puts a lot of stimulus into the economy," Cardoza said.

But the prospects for what Cardoza is again calling the Housing Opportunity and Mortgage Equity Act remain uncertain.

Within days, Congress will take a break for campaigning. When lawmakers return after November for a lame-duck session, they will be confined by the prospect of political power potentially shifting next year. The bill could face other kinds of resistance.

"Some of the big banks love the fact that people are locked in to higher interest rates, and I expect they will fight it," Cardoza said, adding that "if the administration decides to get off its duff, we can do something this year. If not, we'll reintroduce it next year."

Interest rates currently hover around 4.35 percent for conventional 30-year fixed mortgages. Some homeowners became entangled in far higher interest rates in recent years, even as jobs evaporated and the value of their homes plunged.

The ensuing foreclosures have hit the San Joaquin Valley particularly hard, putting the region's lawmakers on the spot. The foreclosure rates in Stockton, Modesto, Merced, Fresno and Visalia all ranked in the top 20 nationwide this year, according to figures compiled by RealtyTrac.

Sixteen House members joined Cardoza in introducing the bill, including Rep. Jim Costa, D-Fresno. Costa and some of the other lawmakers were likewise co-sponsors of the similar bill introduced by Cardoza in January 2009. That bill did not advance, in part because it was opposed by top Obama administration officials on cost and other grounds.

Other lawmakers have their own notions for helping homeowners. This Congress, 98 bills have been introduced containing the phrase "home mortgage." The proposals range from offering new tax deductions for money-losing house sales to establishing a new federal agency to buy mortgages and reduce foreclosures.