Merkley's plan that he revealed last year was known as The 4% Mortgage: Rebuilding American Homeownership. I'll let Senator Merkley explain it himself:The U.S. Treasury Department and members of Congress are preparing to move forward with plans to expand government-backed refinancing programs to underwater homeowners whose loans are packaged in private-label securities.
Senator Jeff Merkley, an Oregon Democrat, is drafting a bill modeled on a proposal he outlined last year to set up a federal trust to purchase or guarantee refinanced mortgages, according to two people familiar with the discussions who asked not to be identified because the bill hasn’t been introduced.
The trust, as described in Merkley’s earlier proposal, would provide relief to borrowers with privately owned loans and probably would be set up under the oversight of an existing housing agency. If Congress doesn’t pass such a measure, the Treasury is planning to step in to pay for rate modifications for those homeowners. - Bloomberg, 2/1/13
Merkley's website provides a link to the PDF of the full plan at the bottom of this link so you can read the whole thing and this is what Merkley's plan does:
Merkley's plan has been endorsed by the National Association of REALTORS:Merkley's plan, which would not require taxpayer dollars but does anticipate the federal government selling bonds to investors to raise funds, is projected to turn a profit over its lifetime, according to models and stress-tests of the underlying assumptions. The Senator, who serves on the Senate Banking Committee and was once the executive director of Habitat for Humanity in Portland, spent over six months developing the proposal and consulting with experts.
Over one-fifth of American homeowners are currently underwater. They are therefore unable to take advantage of historically low mortgage rates and are at much greater risk of default and foreclosure. Merkley's plan would create a new, temporary government-backed trust to purchase mortgages issued by private lenders that meet the program's criteria. After refinancing, average underwater homeowners would, depending on the option they chose, see their monthly payment drop sharply or dramatically cut the amount of time before they begin building positive equity in their home.
In the plan, Merkley calls for the plan to be piloted immediately, a step that could be taken without new legislation from Congress. The proposal envisions a role for the Federal Reserve, Federal Housing Administration, or other agency to create the new trust. - merkley.senate.gov, 7/25/12
Dr. Joseph Stiglitz and Mark Zandi of Moody's Analytics also back Merkley's plan:“Senator Merkley’s proposal would develop a trust to purchase mortgages from loan originators and investors to offer refinance tools that either help homeowners rebuild equity quicker, lower their monthly payments, or ease the payment burden on severely underwater mortgages,” said 2012 NAR President Moe Veissi. “That is exactly the innovative approach that our nation must take to ensure a sustained housing recovery.” - merkley.senate.gov, 7/25/12
“America’s economic recovery is being held back by $700 billion in negative equity in the housing market,” said Dr. Joseph Stiglitz, Professor of Economics, Columbia University. “Millions of homeowners are unable to refinance, because they are underwater on their mortgage and their loan does not carry a government guarantee. Senator Merkley’s broad refinance proposal would allow these families to refinance into loans with a lower interest rate, freeing consumer resources to be spent on other important needs, or allowing the homeowner to rebuild equity more quickly. If adopted, this proposal would help to stabilize the housing market, create new jobs, and boost our overall economy.” - merkley.senate.gov, 7/25/12
Since 2009, 1.8 million borrowers have taken advantage of the Home Affordable Refinancing Program for mortgages backed by government-owned Fannie Mae and Freddie Mac. Merkley's plan would help 930,000 borrowers whose loans are in private-label securities and who are current on their payments. This is another reason in a long list of reasons why Senator Merkley must be re-elected in 2014. Thank Merkley for looking out for homeowners by donating to his 2014 campaign:“Senator Merkley’s plan is a creative and bold effort to address the serious economic threat posed by millions of underwater homeowners,” said Mark Zandi, Chief Economist, Moody's Analytics. “With so many underwater, odds remain uncomfortably high that the housing market and broader economy will continue to struggle. Previous attempts to solve this problem have fallen well short. Senator Merkley’s plan is an ambitious one, and should be carefully considered.” - merkley.senate.gov, 7/25/12