in News > Residential Mortgage
print the content item
On the heels of President Obama's congressional address last week, which referenced the administration's goal of easing refinance terms for underwater borrowers, two federal officials have confirmed that the Federal Housing Finance Agency (FHFA) is exploring its options.

In a statement Friday, the government-sponsored enterprises' conservator explained that it is evaluating ways to boost participation in the Home Affordable Refinance Program (HARP). Treasury Secretary Tim Geithner, meanwhile, told National Public Radio that details of a revamped HARP could be released in the “next three weeks or so.”

“They're very supportive of moving in this direction,” Geithner said of the FHFA. “It's their authority, though, not the president's.”

Through the end of the second quarter, more than 838,000 borrowers had refinanced through HARP, which the Obama administration introduced in early 2009. In Friday’s statement, FHFA Acting Director Edward J. DeMarco called the number of HARP refinances "meaningful but fewer than expected or eligible for the program.”

To be eligible for a HARP refinance, borrowers must be current on their loans and carry a loan-to-value ratio (LTV) between 80% and 125%. Fannie Mae and Freddie Mac have executed more than 1 million “streamlined” refinances outside of HARP and nearly 7 million standard “rate and term” refinances, DeMarco said.
“FHFA is carefully reviewing the mechanics of the HARP program to identify possible enhancements that would reduce barriers for borrowers already otherwise eligible to refinance using HARP,” he said. “If there are frictions associated with the origination of HARP loans that can be eased while still achieving the program's intent of assisting borrowers and reducing credit risk for the enterprises, we will seek to do so.”

Among the frictions thought to preclude broader HARP participation are loan-level pricing adjustments (LLPAs), a form of risk-based pricing that lenders bake into refinance costs for borrowers whose loans are considered high risk.

Another such friction, according to a recent speech by Federal Reserve Board Governor Elizabeth Duke, is limited lender competition for refinanced mortgages, which Duke attributed to lenders’ fear of putback risk. When a lender refinances a loan, the lender is liable for repurchase risk on not only the new loan, but also the original loan, even if the refinancing lender did not underwrite it.

Barclays Capital analysts have interpreted the FHFA statement to mean that the agency “is not looking to increase the amount of borrowers eligible for the HARP program by expanding the cut-off date, but is rather looking to enhance the efficacy of the existing program for current HARP-eligible borrowers.” The analysts believe the FHFA will focus specifically on options meant to help good-quality, high-LTV borrowers.

“While it could take incremental steps such as reducing LLPAs, the most important step, in our view, would be a limited easing/waiving of rep and warranty risk for this targeted set of borrowers,” the analysts wrote. “While we have made the case earlier that this is not straightforward, we think this statement raises the possibility of some initiative in this direction.”


Six important questions you need to ask about your compliance process_id1314


Latest Top Stories

FHFA Seeks Feedback On Proposed Single Security For GSEs

The agency is requesting feedback from mortgage industry professionals on all aspects of the proposed single security structure and in particular, issues regarding the transition from the current system to a single security.


Ellie Mae To Buy AllRegs For $30 Million

"With the acquisition of AllRegs, Ellie Mae will expand its customer base and add a broad array of content and services that complement our portfolio of product offerings," says Sig Anderman, CEO of Ellie Mae.


Survey Shows ATR/QM Rules Are Negatively Affecting Approvals

In a survey of loan officers commissioned by the Federal Reserve Board, more than half said the CFPB's ability-to-repay/qualified mortgage rule has reduced approval rates for certain types of mortgages.


Report Lambastes Servicers For Doing Poor Job With HAMP

SIGTARP once again disses mortgage servicers for failing to keep up with the volume of applications for HAMP as well as the Treasury Department for failing to do a better job of overseeing servicers' HAMP activities.


CFPB Seeks To Ease HMDA Reporting Requirements

The CFPB is proposing to exempt lenders that originate fewer than 25 mortgages a year from its new HMDA reporting rules. In addition, financial institutions with a large number of reported transactions would be required to submit HMDA data on a quarterly, rather than annual, basis.

LenderLive_id1241
Hse SandyHook
Industry Resource
Orb Mobile
SWBC_id1313
NAMFS_id1321
Safeguard_id1322