DS News - Digital Archives

�� VISIT US ONLINE @ DSNEWS.COM RECENT REFIS REDUCED INTEREST RATES BY RECORD AMOUNT OBAMA RE-NOMINATES CORDRAY UPON APPELLATE COURT���S RULING Homeowners who refinanced their mortgages in the fourth quarter of 2012 reduced their interest rates by an average of 33 percent, a record savings not seen in 27 years of observance, according to Freddie Mac. Fourth-quarter refinances also came close to another record as 84 percent of refinancing homeowners either lowered or retained about the same loan principal by submitting additional funds at the closing table. This is just 1 percentage point below the record high of 85 percent recorded one year earlier in the fourth quarter of 2011. ���On average, borrowers who refinanced reduced their interest rate by about 1.8 percentage points,��� said Frank Nothaft, VP and chief economist at Freddie Mac. This translates to about $3,600 in annual savings on a $200,000 loan, Nothaft explained. Among those who did take cash out during their refinances, the total cash-out value in the fourth quarter was $8.1 billion, down from $8.2 billion in the third quarter and another ���low volume,��� according to Freddie Mac. Last quarter���s cash-out volume is well under the $84 billion cash-out peak reported in the second quarter of 2006. HARP refinances generally included higher interest rate reductions. The average HARP refinance lowered a borrower���s interest rate by 2 percentage points, compared to 1.5 percentage points for nonHARP refinances. HARP refinances also tended to occur on older loans. The median age of the original loan in a HARP refinance was 5.9 years, while the median age of the original loan in a non-HARP refinance was 3.7 years. Borrowers receiving HARP refinances in the fourth quarter had experienced a median decline in property value of 29 percent. Non-HARP borrowers generally had not experienced much or any value depreciation. Nothaft praised the federal refinance program, saying, ���While all borrowers that refinanced have benefitted, HARP has enabled many borrowers that traditionally would not have had access to refinance to obtain low rates and significantly reduce their interest rate and monthly payment. This increases the likelihood that these borrowers will continue to perform on their loan and remain homeowners.��� A federal appeals court in Washington, D.C., ruled January 25 that several controversial recess appointments made by President Obama in January 2012 are ���invalid from their inception.��� In Noel Canning v. National Labor Relations Board, the court examined the recess appointments of three members of the Labor Board��� Sharon Block, Terence Flynn, and Richard Griffin���all of which took place on January 4, 2012, during a three-day Senate break. While the president���s nomination of Richard Cordray as director of the Consumer Financial Protection Bureau (CFPB) was not specifically named in the court���s opinion, the decision reached regarding the disputed Labor Board seats has raised questions about the legitimacy of Cordray���s appointment. The former Ohio attorney general was recess-appointed in the same way and on the very same day as Block, Flynn, and Griffin. Administration officials insisted the president was acting correctly under the recess appointment clause of the Constitution; critics argued the Senate was not actually in recess at the time and that the president was skirting the confirmation process. In its opinion, the court agreed that a short break does not constitute a ���recess,��� noting ���the appointments structure would have been turned upside down if the president could make appointments any time the Senate so much as broke for lunch.��� The appellate court���s opinion went on to explain, ���Either the Senate is in session, or it is in recess. If it has broken for three days within an ongoing session, it is not in ���the Recess.������ While the court���s opinion doesn���t address Cordray directly or the validity of his tenure at CFPB, the ruling serves as ammunition for those opposed to the president���s choice for CFPB director, and pundits assert that if a nomination is invalidated, it also invalidates any actions taken by that individual, which for the CFPB could mean more than a year���s worth of work and consumer protection reforms enacted across a wide range of financial debt instruments���including new mortgage servicing rules, revised appraisal guidelines, and Dodd-Frank���s qualified mortgage definition���could all be undone. A spokesperson for the CFPB told Bloomberg that ���the court���s ruling has no effect on the bureau.��� However, one day before the appellate court announced its decision, on January 24, President Obama essentially re-nominated Cordray, framing it as ���nominating ��� Richard Cordray to continue leading the Consumer Financial Protection Bureau.��� Cordray issued a statement following Obama���s re-nomination move and prior to the appellate court���s ruling, saying, ���For more than a year, we have been focused on making consumer finance markets work better for the American people. We approach this work with open minds, open ears, and great determination. We all thank you and the Congress for the opportunity and the honor to serve our country in this important way.��� 39

• Cover