It would be easier for underwater borrowers to utilize the Home Affordable Refinancing Program (HARP) if Fannie Mae, Freddie Mac and banks drop their fees on these refinancings, according to the Amherst Securities Group (ASG).

The Treasury Department designed HARP program to make it easier for GSE borrowers with loan-to-value ratios of 80% to 125% to refinance at lower rates and reduce their monthly payments.

But the refinancing volume has been disappointing due to several factors outlined in an ASG report called Frictions in the HARP Refi Process.

Fannie and Freddie have capped their upfront fees at 2%. But the banks refinancing the loans are charging "high fees as well," according to ASG Senior Managing Director Laurie Goodman.

"That is why there are so relatively few refinancings," she added.

Since many of these borrowers have little if any equity or cash, the extra fees have to be refinanced into the loan amount, which disqualifies some borrowers and reduces the benefit of refinancing for others.

The ASG analyst also discovered that Chase has refinanced more GSE loans with LTVs above 105% than Wells Fargo and Bank of America combined.

Chase has refinanced 4,050 of these high LTV loans compared to 2,430 for Wells Fargo, and 1,140 by B of A. HARP was first rolled out in August 2009.

"It appears that many lenders have been slower to ramp up their use of this program," the ASG report says.

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