A large majority of banks participating in the Home Affordable Refinancing Program have restricted their refis to mortgages they already service or own, according to a July survey of senior loan officers by the Federal Reserve.  

Out of 49 respondent banks, just 12 large banks and two small banks indicated they it was “not important” whether they serviced the loans.

Whereas, nine large banks and 15 smaller banks indicated that servicing is a “very important” or “the most important” factor in determining whether they would refinance a high LTV Fannie Mae and Freddie Mac loan under the HARP 2.0 program.

In response to several questions about the HARP program, 30 banks provided answers and 32 banks simply said, “My bank has very little participation in HARP 2.0.”

Twenty out of 30 participating banks noted that 60% to more than 80% of their refinancings involved HARP loans from April through July.

Meanwhile, many banks participating in the HARP 2.0 program have imposed overlays on top of the standards set by the GSE regulator and Fannie and Freddie.

A significant percentage of senior loan officers noted that their banks are unwilling to offer borrowers a HARP refinancing if they have high LTV ratios, nonstandard documentation of income and assets, or low credit scores.

The Fed survey also found that consumer demand for prime mortgages increased from April to July, although there was little change in bank underwriting standards.

Also, one-third of the respondent banks said high refinancing volumes had exceeded their capacity to process applications.

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