by Broderick Perkins
(5/4/2014) Erate Exclusive - U.S. Senator Barbara Boxer (D-CA) is using record low interest rates to leverage the Federal Housing Finance Agency (FHFA) to quickly move on HARP 3.0.
On May 3, as fixed mortgage rates slipped to new record lows for the second time this year, Boxer fired off a letter to FHFA acting director Edward DeMarco urging him to upgrade HARP (Home Affordable Refinance Program) for the third time, this time to level the playing field and give homeowners the opportunity to shop around for the best rate.
Right now, even with improvements six months ago designed to include millions of more borrowers, only qualified borrowers with Fannie Mae and Freddie Mac loans remain eligible for the so-called HARP 2.0.
A recent federal survey found that only 30 percent of lenders are making an effort to write HARP 2.0 refinances.
"I am greatly concerned about the lack of competition within HARP that means even those homeowners who are able to refinance continue to pay higher rates than they should. This lack of competition gives some lenders a captive market and means borrowers are often stuck with higher rates and less favorable terms," Boxer wrote.
Boxer fired off the missive on May 3, the day Freddie Mac announced the average interest rate on 30-year fixed rate mortgages (FRMs) fell to 3.84 percent and the average rate on the 15-year FRM fell to 3.07 percent, both all-time record lows.
Boxer's letter stokes a fire under rumors that a HARP 3.0 will open the program up to Federal Housing Administration (FHA) loans and private loans including certain subprime loans, Alt-A loans, perhaps even jumbo mortgages and mortgages held by self-employed homeowners and stated-income wage earners.
"Under HARP, lenders looking to compete with a borrower's existing servicer continue to face barriers to participating in the program, including stricter underwriting criteria and full representations and warranties," Boxer wrote in her letter to DeMarco.
"As a result, many homeowners are being forced to refinance through their existing servicer, instead of being able to shop around for the best deal," she added.
Boxer and U.S. Sen. Robert Menendez (NJ) are also drafting legislation to force the government-sponsored enterprises to waive representations and warranties on new HARP loans regardless of whether the refinance lender serviced the previous mortgage.
In a press release announcing the letter, Boxer cited an Amherst Securities Group study that found HARP borrowers paying as much as 53 basis points more than borrowers with other types of loans.
On a $300,000 loan, that costs borrowers nearly $100 more each month, and an additional $34,500 over the life of the loan.
"Current policy is rewarding banks with excess profits at the expense of struggling homeowners," Boxer wrote. "To level the playing field and unlock competition between banks for borrowers' business, FHFA should allow the same streamlined underwriting and associated representations and warranties for new servicers as they do for current servicers."
"Such competition will help ensure that the benefits of today's historically low rates flow to homeowners, and not to the banks," Boxer wrote.
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