Federal Reserve chairman Ben Bernanke is pressuring the Federal Housing Finance Agency (FHFA) to take additional steps to make the newly implemented Home Affordable Refinancing Program (HARP) 2.0 program more accessible for homeowners with GSE loans.
In a letter to congressional leaders, Bernanke points out that FHFA has taken a number of recent steps to improve the HARP but added, "Nonetheless, more might be done," to lower refinancing fees and "more comprehensively" reduce loan putback risk.
The Fed chief also sent the letter to ranking members of the House and Senate Banking committees.
Among other things, Bernanke recommends "reducing further or perhaps eliminating remaining" loan level price adjustment fees on HARP loans.
HARP 2.0's goal is to increase refinancings for underwater – but current – mortgagors with Fannie Mae or Freddie Mac loans.
In his 26-page letter, Bernanke provides numerous recommendations for fixing the housing market along with observations about loan buybacks and other policies that are reducing the availability of mortgage credit.
The letter includes a discussion of foreclosures and efforts to encourage lenders and investors to turn REO properties into rentals.
Currently, supervisors expect banks to sell REO properties as quickly as market conditions permit. The Fed is working on guidance that would "explain how rental of a residential REO property within applicable holding-period time limits would meet supervisory expectation for on-going good faith efforts to sell the property," the letter says.
This guidance would also encourage banks to participate in federal efforts to sell single-family REO properties in bulk to investors that agree to rent them out.
According to the Fed, banks and thrifts held $11.5 billion of residential REO at Sept. 30.