16 CFR Parts 317 and 318: Mortgage Acts and Practices Rulemaking
Lenders should be legally obligated to offer home owners short refinances when the value of a primary residence becomes significantly less than the current principle balances on any existing loan. This should be available to the homeowner within 90 days of homeowner to lender notice regarding the decrease in value and processing should be entirely completed within 30 days of the offer. Significant should be defined as a 40% or greater difference in principle balance and current market value over a period of not less than 1 year. The refinance should be for a value of between 93-98% of the current market value of the home. The new loan's terms should include a profit/loss share clause where, if within a period of 3 years, the homeowner makes a profit on the sale of the property, the profit/loss shall be absorbed 50/50 for year1, 75/25 year2, 90/10 year3 with the decrementing percentage being the lender's portion. This program should be available to customers with good credit and income. Had a program like this been in place with the banks shouldering some market risk, perhaps they would be more responsible with their influence of market prices.