The Mortgage Bankers Association (MBA) is supporting a Senate bill to streamline the Home Affordable Refinancing Program (HARP) relieving lenders of repurchase risk when they refinance underwater GSE borrowers.
The bill sponsored by Sens. Barbara Boxer, D-Calif., and Robert Menendez, D-N.J., would increase competition between lender/servicers when it comes to representation and warranty risk on HARP 2.0 refinancings.
“MBA is pleased that the bill attempts to reduce the existing disparity between a lender’s rep-and-warrant obligations to Fannie Mae and Freddie Mac,” MBA president-elect Debra Still told a Senate panel Wednesday.
Under the HARP 2.0 program, lenders that control GSE servicing can refinance loans and be relieved from any repurchase risk. Yet, other lenders seeking to refinance the controlling-servicer’s loans take on R&W risk.
“Giving existing servicers preferential legal treatment reduces competition,” Columbia University’s Christopher Mayer testified. And the lack of competition allows the existing servicers to charge higher refinancing fees. “This is an unprecedented and inexplicable profit,” Mayer said.
Separately Keefe, Bruyette & Woods analysts estimate the HARP program will generate $100 billion to $150 billion in refinancings this year.
“Given the recent strong mortgage application volume and the increasing strength of HARP 2.0, we would expect prepayment numbers to continue to trend up in the second quarter,” the firm said in a research note.