Boston Federal Reserve Bank president Eric Rosengren wants Fannie Mae and Freddie Mac to do more to refinance homeowners and address housing market problems.

The Fed's aggressive monetary policy action to lower interest rates and increase refinancings has been impaired by falling house prices with an "uncharacteristically muted response" from consumers, Rosengren said in a speech delivered in Stockholm.

In short, many homeowners, who are still current on their loans, are locked out of refinancing because the value of their homes has fallen below the amount of their mortgage. 

Rosengren is calling on the Federal Housing Finance Agency to move ahead with an initiative to improve the Home Affordable Refinancing Program (HAMP)by making it more accessible to underwater borrowers with GSE loans.

He noted that the loan level price adjustments (LLPAs) that Fannie and Freddie charge on HARP refinancings "raises the interest rate for many borrowers and reduces the benefits" of refinancing.

The Boston bank president suggested that FHFA eliminate or reduce the LLPAs. 

Since the Fannie and Freddie were forced into conservatorship three years ago, FHFA's main priority has been reducing the GSEs' dependence on the U.S. Treasury to cover their losses. But Rosengren contends that the GSEs should play a "larger role" in addressing the problems in the housing market. 

"There should be strong encouragement for the GSEs to focus on the housing recovery so home buyers, and those that already have loans, can fully benefit from the lower interest rates generated by our monetary policy action," the Boston bank president said.

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