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Congress Advised to Expand HARP

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Mortgage bankers told lawmakers today that the federal refinance program should have lower secondary fees, higher loan to values and streamlined appraisals.

The Home Affordable Refinance Program allows LTV ratios as high as 125 percent on loans originated prior to June 2009. It is scheduled to sunset in June 2012.

The Barack Obama administration had lofty expectations when it was launched in March 2009 with the goal of helping as many as 5 million borrowers. But fewer than 900,000 have completed a HARP refinance.

Obama said in a speech last week that his administration intended to work with federal agencies to help more borrowers take advantage of historic rates.

The next day, Federal Housing Finance Agency Acting Director Edward J. DeMarco said that his agency was considering enhancements to the program. FHFA regulates and controls Fannie Mae and Freddie Mac.

“FHFA is also considering the barriers to refinancing mortgages that would otherwise be HARP eligible but for having a current LTV above 125 percent, HARP’s current ceiling,” the acting director said in a statement.

Seizing on a fertile environment for HARP enhancements, the chief lobbyist of real estate finance, Mortgage Bankers Association President and Chief Executive Officer David H. Stevens, said that expanding the program is the most-desired approach to supporting the housing market and bringing back private capital.

He made his comments Wednesday before the Senate Banking Subcommittee on Housing, Transportation and Community Development, according to a statement from the trade group. Stevens was speaking at the hearing, New Ideas for Refinancing and Restructuring Mortgage Loans.

LTVs should be raised on HARP transactions, according to Stevens, so that otherwise qualified borrowers who are underwater could participate.

In addition, appraisals and other requirements on HARP refinances should be streamlined, while loan-level pricing adjustments should be reduced since Fannie and Freddie already own the loans being refinanced and will have no additional risk.

Stevens said that HARP eligibility should be extended to loans originated after June 2009.

“We need to help the large number of borrowers unable to refinance at today’s near-record low interest rates,” Stevens testified. “While policymakers have introduced programs to help some distressed borrowers, eligibility criteria excludes a significant number of borrowers who would benefit from refinancing.”

The MBA chief said other housing market support options include government support for local property investors and encouraging the use of bulk investors.

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