Columbia Business School: HARP 3.0 could benefit 13 million homeowners, jolt the economy

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The HARP 3.0 bill, slowly making its way through Congress, could help at least 13 million households refinance, save them an average $3,000 a year and help them avoid foreclosure, all while giving the economy a real shot in the arm.

Research from Manhattan’s Columbia Business School at Columbia University, found that Senate Bill 3085, introduced by U.S. Senators Robert Menendez (D-NJ) and Barbara Boxer (D-CA), would expand and streamline refinancing opportunities under the existing Home Affordable Refinance Program (HARP) and produce homeowner savings of at least $35 billion a year.

Columbia’s study includes a state-by-state breakdown of the savings.

Also see: “The HARP Archive” on DeadlineNews.Com for the latest HARP news.

Homeowners who can refinance now can cash in on record low mortgage rates, cut their monthly mortgage payment and ease their financial burden. Unfortunately, many homeowners don’t qualify for special government refinance programs, and the open mortgage market is a jungle.

Introduced in May, SB 3085 has been making it’s way through the Senate’s Committee on Banking, Housing, and Urban Affairs and its essence has the support of President Obama.

The current HARP, improved from the original, has the potential to reach only an estimated five million homeowners, saving them only $16 billion a year.

Among other restrictions, HARP refinances are currently open only to families who are current on their Fannie Mae or Freddie Mac mortgage and who have a loan-to-value ratio higher than 80 percent.

Under the proposed Senate bill, eligibility would be extended to Fannie and Freddie borrowers regardless of how much they owe on their home and it would extend the period of eligibility to loans made on or before May 31, 2010, instead of the current May 31, 2009 cutoff.

Obama, under the supportive “The President’s Refinance Plan,” wants the legislation to do even more – give those who don’t have Fannie Mae or Freddie Mac loans the option to refinance through the Federal House Administration.

That potentially would thrust more mortgages (totaling as many as 21.5 million) into the refinance market and generate competition – perhaps cheaper costs, according to an analysis of the academic study by the Center for Responsible Lending (CRL).

In doing so, HARP 3.0 would not only benefit homeowners, but also the mortgage industry and the economy. Expanding refinances that lower payments would also reduce the number of future defaults on Fannie – and Freddie-backed loans, which will benefit taxpayers who ultimately pay for bad loans.

CRL says the current refinancing barrier is of particular concern for African-American and Hispanic families. Among homeowners current as of February 2011 on a mortgage originated between 2004 and 2008, a larger percentage of African Americans and Hispanics were making payments on a high-interest mortgage than were non-Hispanic white borrowers.

Get more information on HARP 3.0 and additional, related legislation in the break-out “U.S. Senate Bill 3085 is the rumored HARP 3.0″ DeadlineNews.Com story.

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