Obama administration officials have identified several constraints on the HARP program – including mortgage buyback risk – that are keeping Fannie Mae and Freddie Mac seller/servicers from refinancing underwater borrowers.
The administration is trying to work with Federal Housing Finance Agency to fix the Home Affordable Refinancing Program (HARP). "We will work closely with director DeMarco to remove or reduce the tensions in the HARP program," a U.S. Treasury spokesman said. Edward DeMarco, the acting FHFA director, must approve any changes to the HARP program.
Launched in April 2009, the program is designed to help borrowers with high loan-to-value ratios refinance into new GSE guaranteed loans. Underwater borrowers with LTVs up to 125% can refinance under HARP, but only if they are current on their mortgage payments.
The administration wants to raise the 125% LTV cap and reduce the refinancing fees charged by Fannie and Freddie.
The Financial Services Roundtable and its Housing Policy Council supports such changes, including efforts to streamline the process. Housing Policy Council vice president Paul Leonard noted that the administration is doing the "right thing" by trying to improve the HAMP program.
"It is probably too hard to create a new program at this point," Leonard told ASR sister publication National Mortgage News. But the government affairs VP does not consider put-back risk to be a major constrain on the HARP program. He said the default and put-back risk should be lowered if the loan is underwritten to meet the GSEs' current underwriting standards.
"To be eligible for HARP the homeowner has to be current," Leonard said. If the refinancing lowers the interest rate for the borrower, "it probably improves the risk."