DS News - Digital Archives

SENATORS INTRODUCE REFI BILL TO EXPAND HARP month aimed at revamping the Home Affordable Refinance Program (HARP). The Responsible Homeowner Refinancing Act would expand HARP eligibility to all borrowers with Fannie Mae or Freddie Mac mortgages who are current on their payments, regardless of their equity position. While recent changes to the program did Lawmakers reintroduced legislation last away with the 125 percent loan-to-value (LTV) ratio ceiling initially in place and opened it up to more underwater borrowers, lawmakers say responsible homeowners who have been paying down their balances and have equity in their homes are hit with higher costs and have dif- ficulty refinancing. Sens. Barbara Boxer (D-California) and would be prohibited from charging up-front fees to refinance any loan they already guarantee and a single set of rules would apply for all eligible borrowers. Currently, borrowers with greater than 20 percent equity must pay higher up-front refinancing fees, and their refis are processed differently than those with less than 20 percent equity. The bill would also eliminate appraisal costs for all borrowers. The legislation would make it possible for THE LEADER IN DEFAULT SERVICING NEWS Robert Menendez (D-New Jersey), among others, drafted the bill, which was originally introduced in May but never made it farther than a committee hearing. Menendez said in a statement that passing the bill "will get rid of the red tape that leaves millions of borrowers . . . trapped in higher interest loans, put money back into the pockets of middle class families, and strengthen our economy." He added, "I'm asking Republicans to join us in putting families first." If the bill passes the House—an uncer- tain feat, given election-year partisanship and steadfast Republican opposition—the GSEs lenders to compete for refi business more freely. Today under HARP, lenders who want to compete with a borrower's current lender face stricter underwriting criteria and greater risk that the GSEs will force them to buy the loan back if the borrower defaults. The new legislation would direct Fannie and Freddie to require the same streamlined underwriting and associated representations and warranties for new servicers as they do for current servicers. Boxer called the bill "a win-win-win." She said with its passage, "homeowners will have more money in their pockets, Fannie and Freddie will see fewer foreclosures, and the housing market and economy will be strengthened." According to Boxer and Menendez, there are nearly 13.5 million responsible borrowers who are current on loans guaranteed by Fannie Mae and Freddie Mac who could benefit from refinancing at today's low rates. REPURCHASE RISK INCREASING FOR BANKS: FITCH RATINGS recovery may finally be underway, others signal that banks will likely continue to see repurchase claims from Fannie Mae and Freddie Mac. Analysts with Fitch Ratings issued a report While some signs suggest the housing in late August stating repurchase risk remains high for several financial institutions, including Bank of America, JPMorgan Chase, and Ally Financial. According to Fitch, repurchase risk climbed to 41 percent for Bank of America. Roughly 60 percent of the claims stemmed from private- label requests. For Citigroup, outstanding claims from the back claims fell 10 percent for the company on a linked-quarter basis. Wells Fargo saw some improvement. Buy- 40 outstanding claims still hover at 94 percent. Fitch analysts wrote that the ratings agency The report held that JPMorgan Chase's "continues to believe that repurchase claims represent a moderate pressure to earnings at these financial institutions, and that the GSEs will increasingly focus on smaller originators as they continue to work their way" through claims from just before the financial crisis. Analysts nonetheless noted "a great degree first quarter rose to 12 percent from the previous year. of volatility" occurring as a result of buyback claims, with Bank of America's repurchases up 40 percent to $395 million over the second quarter this year but down year-over-year. What will more repurchase risk mean for big banks? As Fannie and Freddie devote more resources to buybacks, according to Fitch, origi- nators will find themselves with more "burden of proof." Help shape the next issue of DS News. Drop us a line at Editor@DSNews.com.

• Cover