Four million more borrowers with high LTV loans could be refinanced if certain impediments to the Home Affordable Refinance Program are corrected, according to Federal Reserve Board governor Elizabeth Duke.
The HARP has already helped nearly 800,000 homeowners with Fannie Mae and Freddie Mac guaranteed loans refinance since it was launched in April 2009.
Gov. Duke told a Fed-sponsored housing conference that high refinancing fees paid by borrowers and the "putback risk" lenders face are two of the "frictions" that may be impeding these refinancing transactions.
"Perhaps competition among potential lenders could be increased if a minimum number of timely payments could be used as a proxy for sound original underwriting to relieve the liability of the refinancing lender from the mistakes of previous lenders," Duke said Thursday.
She also pointed out that "some mortgage insurers will not agree to re-underwrite their policies despite diminished default risk after the refinancing."
The Fed governor indicated the HARP program warrants fixing "given the potential savings to households" and the "relatively low take-up on this program."
Separately, the GSE regulator reported Thursday that Fannie and Freddie refinanced nearly 71,500 borrowers in the second quarter with loan-to-value ratios of 80% to 125% under the HARP program.
This includes 14,900 underwater borrowers with LTVs above 105% and up to 125%.
HARP has helped 62,430 underwater borrowers in the 105-125 LTV bracket refinance over the past 30 months.
