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The President today is in Reno, Nevada, and he’s going to take a victory lap on HARP 2.0.
President Obama will announce new figures Friday showing a dramatic spike in the number of Americans taking advantage of federal programs designed to help struggling homeowners and stabilize the lagging housing industry, administration officials said Thursday.
The numbers, officials said, demonstrate the success of programs Obama has implemented to let more homeowners refinance their homes at a time of historically low interest rates. And they demonstrate the need, they said, for Congress to take still more action to give even more Americans the same opportunity [...]
According to the White House, refinancing applications in three of the hardest-hit states in the housing crisis, Arizona, Nevada and Florida, have ballooned since Obama announced programs to let more homeowners who are underwater on their loans qualify for refinancing with lower, more affordable rates.
The raw numbers, discussed on a conference call with HUD Secretary Shaun Donovan, are that applications are up in Nevada 240%, Arizona 180% and Florida 125%. That data comes from the Mortgage Bankers Association. Keep in mind these are APPLICATIONS for HARP 2.0 loans, not the actual refis themselves. Just this week, the Wall Street Journal described the long backlog of refi applications. Touting the applications doesn’t mean a great deal.
That’s especially true because the design of HARP 2.0 has artificially profited banks at the expense of homeowners. The banks, in a very strange and apparently coordinated manner, have unilaterally decided that they will only perform HARP refis for underwater borrowers on the loans they already service. This eliminates competition for those loans. And the immediate effect of that is higher costs for underwater borrowers, who are trapped and cannot get a refi with anyone but their old servicer. So the servicers raise the interest rates they offer on the refi. In some documented cases, the closing costs, which are almost entirely profit for the bank, are higher than the savings on the refinance.
To his credit, Donovan addressed this on the conference call today. While he fudged at the start and threw out that an underwater family can save $2,500 to $3,000 a year on average with refis (that’s if they were taking advantage of actual interest rates and not the elevated ones from HARP 2.0), he added that he would like to see three bills pass Congress that would expand the refi programs. The first concerns expanding the Fannie/Freddie HARP changes to the entire mortgage market, and it’s being introduced by Dianne Feinstein. The second would reduce closing costs if the borrower takes the savings from HARP and uses it to build equity, and it’s being carried by Jeff Merkley. And the third, from Barbara Boxer and Bob Menendez, would specifically address the lack of competition on HARP 2.0 refis of underwater borrowers on loans owned or backed by Fannie Mae and Freddie Mac. “Lenders have big incentives to refinance their own loans, but other lenders don’t have incentives to increase competition,” Donovan said. “That results in higher costs for borrowers. (Boxer and Menendez’ bill) would remove some of the last barriers to cross-servicer competition.”
I didn’t get to ask a question on the call. But nobody has been able to credibly explain what these barriers to cross-servicer competition are. Boxer and Menendez don’t really explain it in their bill. In this video of a hearing with Boxer and Menendez, it again doesn’t really get explained. There’s some talk that other servicers would have to more fully underwrite the refis, while the current servicer can just do a verbal commitment because they have all the data. But that’s like saying that lenders don’t make loans because they’re too hard. If there’s money to be made on new business – and there is – these are not barriers. I would argue that the problem is the DESIGN of HARP, which again gives the banks discretion to implement the program. The fact that every bank up and decided to only refi the loans they service under HARP smacks of collusion. And nobody has sanctioned them for it.
The party with the best opportunity to sanction the banks for this collusive behavior is the Federal Housing Finance Agency, which oversees Fannie and Freddie who own these loans. And predictably, under questioning later in the call, Donovan admitted that FHFA has practically all the authority in the Boxer-Menendez bill already. In other words, Ed DeMarco could “remove” these barriers to cross-servicer competition right now if he so chose. Donovan said that “we will continue to work with FHFA” on getting those barriers removed, and he stressed the urgency of working quickly, while interest rates remained at historic lows.
Clearly there’s a lot of tension between what the Administration and this independent regulator at FHFA want to do. If that’s a real problem, of course, the President could fire Ed DeMarco and replace him with a recess appointment. But the larger point is this: The White House has had the authority to do a mass refinancing program for three years-plus. They have implemented it slowly, ineffectively, and in such a way that banks could game the system. And though they are trying to argue that they need the help of Congress to fix the system, they actually don’t.
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From my personal email:
” That is why I will not wait for Congress to act to help homeowners. The Home Affordable Refinance Program has already helped nearly 1 million homeowners improve their financial situations, but until now, eligibility regulations and costs associated with the program have kept it from having a wider impact. Now, a new set of rules will open the program to nearly anyone with a mortgage backed by Fannie Mae or Freddie Mac. For assistance with a foreclosure or to find a local housing counselor, I encourage you to call your mortgage servicer directly, speak with a housing specialist at 1-888-995-HOPE, or contact the Department of Housing and Urban Development at 1-800-569-4287. You can also visit
http://www.HUD.gov/foreclosure and http://www.MakingHomeAffordable.gov.
Our Nation is recovering from one of the worst economic crises in generations, and we still have a long way to go before every American who wants a job can find one, before every family can regain the sense of security that has been slipping away, and before our communities can get fully back on their feet. From passing the Recovery Act to saving the American auto industry, my Administration has laid a strong foundation for growth, and we continue to take bold action to do what is right for our economy. Today, the tide is finally turning. Businesses have created millions of new jobs, more companies are bringing jobs back and investing in America, manufacturers are hiring, and our economy is growing stronger. While it will take time to fully repair the damage, I am confident our Nation will not only recover, but also prosper in the 21st century. For more information on jobs, health benefits, housing assistance, and other public resources, you may also call 1-800-FEDINFO or visit http://www.USA.gov.
Thank you, again, for writing.
Sincerely,
Barack Obama
American housing is a disaster–Bush let it start, build and go unregulated, and Obama because he’s apparently not taken it seriously and
not had a substantial and thorough fixit. I’m glad we bought long ago and dont have to face today’s mortgage industry.
I sold a few years before the meltdown, and now I rent. I got lucky. Thank goodness.
In 2006, I went out to look to at homes in this area (Lake county, Calif.) Only one home was available for under 150 K – and it could hardly be called a home, It was a beaten down wreck of a trailer that would have needed to be torn apart and rebuilt. Every other home on the market was over 200K, with most homes being over 350K.
Now some six years later, all those homes are underwater, as the latest real estate books show that most homes are available from anywhere between the price points of 89 K to 179 K. California’s housing prices have been destroyed, and families have been destroyed along with this manipulative action of the banks and mortgage companies.
I have helped several families fill out and deal with this HARP program (though I thought it was called HAMP?) The people get the run around. They are told to send things in. They must make certain declarations. They spend months complying, with the bank insisting they need all this paperwork.
Finally the bank says it has what it need for the re financing. But then within three weeks, the bank claims it never recieved any of the submitted paperwork. Luckily for people I helped, they did audio or video recordings of everything that was said over the phone so the bank cannot back out like this. But many people are getting screwed over, as they are not recording their phone interactions with the banks.
It is also important to realize that the banks insured their mortgages – so they are not really out anything. And many people have walked away from the original home they purchased, in order to actually get a better home for less money.
Meanwhile, the revenue for the state from taxes on property and homes is also in serious decline. When I think of how Obama’s administration has offered up some 255 billions of dollars for weaponry in the same period that California needed and was refused a loan from Tim Geithner, I want to cry.
And many entered the rental market as above mentiones. It is now so tight that prices are rising, many pay over 50% of income for housing costs. Not much rental housing has been built in the last few decades and flipping has taken out a lot.
It seems that we can not trust markets to be motivated by selfish self interest to give consumer’s a deal like Ron Paul and Mitt claim they will.
Rather markets work together to squeeze the consumer in the Real World.
Its been a few years but Obama is trying to make some good political news out of these numbers? Its to little to late and much like the funny unemployment numbers and happy talk about the economy I fear will piss off more voters than it convinces.
This is perverse. Keiser says the timing is right to short the bejeepers out of JPM stock. Guess we’ll know JPM’s status after the opening bell of markets tomorrow.
I think the author is seeing a conspiracy where none exists. People who need help from HARP getting a refinance, by definition, are unable to go to the market and get a refinance on market terms. Only the bank that is already stuck with these borrowers has any incentive to make a new or modified loan to them, because that bank wants to try to avoid the costs of a foreclosure. Other banks are incurring additional risk that a normal loan normal market loan would entail without, the reward of possibly avoiding foreclosure costs.
Of course, HARP refi borrowers should pay more in interest/closing costs. They represent a riskier loan.