Yesterday I looked at the Administration’s new housing policies, particularly the mass refi plan they sent to Congress. Now, maybe that’s not something to focus on specifically, because John Boehner sealed the deal on that yesterday by saying that he has no interest in the government helping homeowners:
“One more time? We’ve done this. We’ve done this at least four times where there’s a new government program to help homeowners who have trouble with their mortgages,” the Ohio Republican told reporters on Capitol Hill.
“None of these programs have worked. I don’t know why anyone would think that this next idea is going to work,” Boehner continued. “All it does is delay the clearing of the market. As soon as the market clears and we understand where the prices really are — [that] will be the most important thing we can do in order to improve home values around the country.”
The idea that you can improve home values by letting millions of people fall into foreclosure – leading to millions of cheap foreclosure sales – is nonsensical. But regardless, it doesn’t look like Congress will be amenable to any terms on refis for homes owned by banks or private-label investors.
As far as GSE-owned homes go, however, the Administration doesn’t have to go through Congress. And the White House has already put in place their refi changes for Fannie and Freddie back in October. You might ask why this hasn’t led to any tangible refi surge on GSE-insured loans. In fact, someone (not Ed Henry) did ask Shaun Donovan that at a press briefing yesterday:
Q: Mr. Secretary, to follow up on Norah’s point, in October, the We Can’t Wait stuff — how many homeowners have you helped, then, with Fannie and Freddie mortgages since October when the President said he was going to move?
SECRETARY DONOVAN: So, in total, since — and the program is called HARP — since it was first introduced in 2009, it’s helped close to a million homeowners refinance. The changes that the President called for and that were then implemented later in — or there were specific details released later in the fall, those changes began to go into effect just in December.
Q: The ones from October of 2011?
SECRETARY DONOVAN: That’s right, the ones — so to be clear, he gave his jobs speech and called on his administration to work with Fannie Mae and Freddie Mac to make changes. We worked on those through the fall and they were implemented, started in December. And so already there are tens of thousands of homeowners that have closed on those loans. But again, they’ve only been in place for a few weeks at this point where folks can actually get those loans.
My understanding from Administration officials is that there are some technical changes that need to be made to free up the refinancing. In particular, the big stumbling block to GSE refis concerns representations and warrants. The lender does not want to be held responsible by Fannie and Freddie for defects to the original loans, and the GSEs have agreed to extinguish this if the can do the refis for underwater borrowers. But according to Bill McBride, this “applies to Desktop Underwriter® (DU) and that will not be updated until March.” So you’re probably not going to see a surge of refis until then. I’m not sure where Donovan is getting the “tens of thousands” number from.
Furthermore, HAMP changes announced last week would also apply to the GSEs, giving them an incentive for principal reductions. But Ed DeMarco, the head of the FHFA, has not yet responded to the request, and determined whether he would allow Fannie and Freddie to participate, according to Administration officials. The Administration put the GSEs in position where they should reconsider their policy against principal reduction, according to one official, but to date, the FHFA has taken no position on the pay incentives.
I’ll add one thing relative to the Homeowner’s Bill of Rights. What the Administration announced yesterday, on national servicing standards and simpler mortgage forms, is basically something the CFPB can pick up and run with. They can set industry practice through their regulatory authority. A lot of these initiatives were already moving forward, but the announcement kind of gives shape to the new standards that are coming out of a bunch of overlapping processes, so that everyone is aware of the position and the changes.
There’s more I could discuss on these plans (and you can get more discussion here and here. But the short form is this: the parts that require Congress to act won’t happen, and unless the Administration gets tough with or flat-out fires Ed DeMarco, the parts that require the GSEs to act might not, either.