In the most recent refinance wave, the typical refinance reduced the borrower’s monthly payment by $279, or over $3,000 a year, with about 18 million borrowers refinancing between the fourth quarter of 2019 and the first quarter of 2022. However, under the current refinance system, millions of borrowers do not or cannot take advantage of these opportunities. Borrowers left behind are disproportionately those who could use this relief the most and those most likely to experience foreclosure.

In this report, we propose a streamlined refinancing program. Balancing the interests of borrowers, investors, and servicers, this proposal would require servicers to call borrowers to offer refinancing when a payment reduction trigger is achieved, streamline the refinance process, and add consumer protections. Our back-of-the-envelope analysis suggests that our proposal could decrease foreclosures by about 8 percent if fully implemented. Moreover, it can be implemented in various forms by Fannie Mae, Freddie Mac (or jointly by the Federal Housing Finance Agency, or FHFA), the FHA, or the VA, with any party not having to implement the entire proposal for it to be effective. Neither congressional action nor rulemaking would be required for those entities.