Menendez has co-sponsored a bill to make the Home Affordable Refinance Program more widely available to underwater borrowers and to increase competition between servicers. Under the initial HARP program, lenders or servicers that controlled the servicing had a monopoly in refinancing borrowers and generally charged high fees.
“This is an issue I have long worked to address and we have made some progress with FHFA,” the New Jersey senator said in a statement provided to NMN.
FHFA acting director Edward DeMarco recently told the Senate Banking Committee that his agency made changes to increase the number of HARP refinancings by a new lender/servicer that doesn’t own or control the servicing.
“I believe we have addressed the issue” raised by Menendez, Demarco said at an April 18 hearing. “In fact, the evidence has shown we are getting a good bit of cross-servicer participation in the HARP program.”
In September 2012, the FHFA issued a new representation and warranty policy that eliminated all repurchase risk on new HARP refinancings once the borrower makes 12 on-time payments on the new loan.
Menendez did not attend the April 18 hearing. But he noted the September 2012 policy reduces repurchase risk on HARP refinancings.
“My legislation goes beyond this narrow fix by expanding cross-servicer competition to all eligible HARP loans,” the senator said, by eliminating the 12 monthly payments test.
“These borrowers have already proven their commitment and ability to repay their loans having weathered the difficulties of a weak economy through sacrifice and dedication and have earned the option of refinancing into today’s low rates. My legislation will make sure they get that relief,” he said. Menendez chairs the Senate Banking Subcommittee on housing.
NMN asked FHFA officials for evidence that HARP refinances by new servicers have increased. But they declined to provide cross-servicer data.