Entitled
the Housing Opportunity and Mortgage Equity (HOME) Act, the legislation
would allow homeowners to refinance to, and prospective home-buyers the
opportunity to apply for, a 30-year mortgage at the below-market rate
of 4 percent. By targeting homeowners and home-buyers alike, the bill
would both reduce the foreclosure rate and stabilize housing prices,
according to a press release from Rep. Cardoza's office.

"Anybody who has a 7 or 8 percent mortgage now could refinance and get
the 4 percent rate," explained Donald Norton, of ERA The Norton Group
of Somerville. "It will save people with 7-8 percent mortgages now
upwards of $500-700 a month."

Many existing homeowners cannot
currently refinance their mortgage to obtain a better rate and lower
monthly payments, because the decrease in housing prices has left them
owing more on their mortgage than their home is worth.

Typical
monthly payments on a 30-year, $300,000 mortgage at 7 percent total
over $2,000, while at 4 percent, the same mortgage would require only a
$1,400 monthly payment.

"I've been doing this for 30 years, and
I've never seen it this bad," Norton said, referring to the housing
crisis. He added that about 20 percent of homeowners in Somerville
currently have mortgages with interest rates over 6 percent, most of
whom could, consequently, benefit from the bill.

The bill comes
on the heels of the 700-billion-dollar Troubled Asset Relief Program,
or TARP, established by Congress to address the sub-prime mortgage
crisis in late 2008.

"I think it's a great bill; its part of
what we should be getting for all the money that is being given out.
There are people out there who would benefit," Norton opined, in
reference to TARP and its focus on the financial industry.

Somerville's
Congressman, Michael Capuano, expressed broad support for legislative
responses to the housing crisis, but was more reserved regarding the
HOME Act.

"There are a number of proposals designed to help
homeowners struggling to make their monthly mortgage payments. I am
closely reviewing all proposals, including H.R. 230, and will work to
advance those that I think stand the best chance of stabilizing the
housing the congressman explained in an email to the Somerville News.
H.R. 230 is the number formally assigned to the bill, or the HOME Act,
while it is under consideration in the House of Representatives.

The
legislation would work by exploiting the control the government gained
over mortgage giants Freddie Mac and Fannie Mae after it prevented them
from collapsing last summer. In effect, the government would require
both mortgage companies to purchase the new, low-interest-rate
mortgages, if lenders wanted to sell them. The security this guarantee
would provide to lenders would, in turn, enable lenders to more easily
offer new mortgages. Under this scheme, investors who currently own
mortgage-backed securities – securities which helped drive the
financial industry into its present state of crisis – could be paid
back in full, according to press releases from Congressman Cardoza's
office.

"This kind of a bill is good, because it's not giving
away money; it's just saying that the government will pressure banks to
refinance somebody who is having problems," explained Norton.

The
bill is currently before the House Committee on Financial Services. It
is not clear if the bill will reach the floor of the House.