Make Harp 3.0 Happen

• FHFA announced last month that the HARP Program would be extended through 2015, though if the program is not expanded it is hard to envision it helping very many people beyond this year.




• Mortgage Officials met with the White House in April at which time the Obama Administration continued to indicate its support for expanding HARP to private-label loans and extending the HARP eligibility date:
  http://www.housingwire.com/news/2013/04/30/harp-30-chatter-sparks-private-label-loan-debate.
  At this point talk is cheap. Underwater homeowners want to see a little less talk and a lot more action, however so far the Obama Administration has not been willing to flex the political muscle needed to make the changes necessary to bring HARP 3.0 to fruition.




• One positive piece of news is the nomination of Mel Watt to replace Ed Demarco as director of the FHFA. If Watt is confirmed it is conceivable he will lift restrictions such as the May 31, 2009 securitization cut off date for HARP eligibility.




• There is no update to pending HARP legislation. The Responsible Homeowner Refinancing Act of 2013, bills H.R. 736 and S. 249, continue to sit idle in chamber committees.




• The Merkley Mortgage, which was first piloted in Oregon’s Multnomah County, has now been expanded to include a limited number of homeowners in Crook, Deschutes, Jackson, Jefferson and Josephine counties. The program has been named the Loan Refinancing Assistance Pilot Project (LRAPP) program with the expectation of helping 300 underwater homeowners to refinance.




• The change.org petition to expand the Merkley Mortgage to other states is still active. Please sign the petition if you have not already done so.
  http://www.change.org/petitions/u-s-treasury-and-state-housing-agencies-that-disperse-hardest-hit-funds-help-underwater-homeowners-by-implementing-the-merkley-mortgage

Four and a half years ago in response to the mortgage crisis the government seized control of Freddie Mac and Fannie Mae. The Federal Housing Finance Agency (FHFA) was created as a regulatory agency and the two government sponsored mortgage giants were placed into conservatorship of the FHFA while the murky waters of the financial crisis of 2008 were navigated. More than 4 years later, little has changed. The aftermath of the financial crisis is still being dealt with and there has been no sign of legislation to reform Fannie and Freddie, or the role of government in the securitization of mortgages on the secondary mortgage markets. Not only has the President or Congress not put forth a plan for Housing Reform, but they have yet to replace Ed Demarco as the acting director of the FHFA. For more than 3 years the FHFA has been led by a man that wasn’t even appointed to the position. During his tenure Demarco has thrown up all sorts of brick walls that have slowed the housing recovery. From not allowing loan modifications unless borrowers were on the verge of foreclosure to strict limits on securtization cutoff dates for the HARP program, Demarco has been thwarting all efforts to aid underwater homeowners since he assumed the position of acting director in 2009. Now Demarco is taking on GSE reform. This week the FHFA unveiled plans to build a single-securitization platform that would include a new business entity that would function in between Fannie and Freddie. It is one thing to allow Ed Demarco to wreck short term policies such as HARP and HAMP, but now he is getting his fingerprints all over the future of mortgage securitization. Perhaps the plan being put forth by Ed Demarco and the FHFA is a good one. Frankly, that is beside the point. Reform of this magnitude shouldn’t be coming from a temporary leader of a government agency. The President and Congress have shown a complete lack of courage in dealing with this problem. And allowing Ed Demarco to be the “problem solver” for Housing Reform is just ludicrous. It just proves how spineless and negligent our current policy makers are.

I have received a lot of questions about when the Rebuilding American Homeownership that is being piloted in Oregon’s Multnomah County will be available to people in other areas of the country. As a refresher The Rebuilding American Homeownership Pilot Program (RAHPP) is a plan proposed by Oregon Senator Jeff Merkley that would allow underwater homeowners additional refinance opportunities even if their mortgage is not owned by Fannie Mae or Freddie Mac. The program is being piloted in Multnomah County which is in the Portland, Oregon area. It is being funded from U.S. Treasury “Hardest Hit” Funds that were awarded to Oregon. Many people have hopes that RAHPP can evolve into HARP 3.0 and become available nationwide. I hate to throw cold water on the hopes of the many people that really need this program to be available to them, but I think it is very unlikely that RAHPP gets a green light nation wide. The funds just aren’t available to support it nationally, and I’m highly skeptical that Congress would be able to pass legislation to fund the program for nationwide launch. I think a more likely scenario is certain states will follow Oregon’s lead and tap into existing funds such as the U.S. Treasury “Hardest Hit” fund (or potentially other federal funds that have been earmarked for economic stimulus) to deploy their own refinance programs. If the pilot program in Multnomah County works out well it is likely other states will use it to model the refinance programs they launch. The question becomes how grand can the scope of Merkley Mortgage be if it is rolled out by states using U.S. Treasury Funds? Only 18 states were awarded “Hardest Hit” Funds and it is likely that states would want to target specifically hard hit real estate markets if and when they launch programs similar to RAHPP. The bottom line is I think RHAPP will expand later this year to select areas in select states but I don’t believe it will even become available nationwide. If you live in a state that received “Hardest Hit” funds you probably have a better chance seeing some version of this program than states that did not receive funds from the Treasury. Here is a list of states that were awarded U.S Treasury funds: Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Washington DC.

Last week the U.S. Treasury Department approved a pilot program in Oregon’s Multnomah County that would allow underwater homeowners additional refinance opportunities even if their mortgage is not owned by Fannie Mae and Freddie Mac. The program draws heavily from Senator Jeff Merkley’s Rebuilding American Homeownership proposal made last year. The pilot is officially known as the Rebuilding American Homeownership Pilot Program (RAHPP). RAHPP, which uses funds from the U.S. Treasury “Hardest Hit” Fund, could serve as a national model for expanding HARP to homeowners with non-GSE held home loans. The plan works like as this. Any underwater homeowner that is current on their mortgage and have no other residential property can choose between two refinancing options:

• A 30-year fixed-rate loan at 5 percent
• A 15-year fixed-rate loan at 4 percent

All loan types qualify, the current mortgage does not have to have been originated before May 31, 2009, and the current mortgage need not be secured by Fannie Mae or Freddie Mac. The only other requirement is the homeowner must plan on staying in their home for at least five more years. There have been no details yet released on how long the pilot program will run, what the success criteria for RAHPP is, or when it may be expanded beyond Multnomah County, however other states are said to be considering using the U.S. Treasury “Hardest Hit” Fund to finance similar initiatives. At the very least it appears that individual states will have the U.S. Treasury’s blessing to move forward with their own refinance plans for underwater homeowners.

Senators Robert Menendez and Barbara Boxer have introduced a new bill to the 113th Congress aimed at expanding the Home Affordable Refinance Program by removing barriers that prevent existing Fannie Mae and Freddie Mac borrowers from taking advantage of the HARP program. The bill is very similar to a proposal they sponsored last summer. The bill, S. 249 – The Responsible Homeowner Refinancing Act of 2013, would do the following:

• Ensure that streamlined refinancing is available and consistent for all Fannie and Freddie borrowers, regardless of whether they are underwater or not
• Reduce up-front fees on refinances
• Eliminate appraisal costs for all borrowers
• Remove additional barriers to competition
• Extend HARP by one year, to allow eligible borrowers more time to access the program

The bill has extensive support from housing advocacy groups and economists. 21 Senators have also added their names as cosponsors of the bill. However, at this time the support is strictly partisan. No Republican has yet to cosponsor or endorse the bill. S. 249 has been referred to the Senate Committee on Banking, Housing, and Urban Affairs. The best way to show support for this bill would be to write or call the offices of the GOP members of the Committee on Banking, Housing, and Urban Affairs and urge them to support S. 249 – The Responsible Homeowner Refinancing Act of 2013. Here is the list of Republicans that sit on the committee:

• Senator Mike Crapo – ID – Ranking Member
• Senator Richard Shelby – AL
• Senator Bob Corker – TN
• Senator David Vitter – LA
• Senator Mike Johanns – NE
• Senator Patrick Toomey – PA
• Senator Mark Kirk – IL
• Senator Jerry Moran – KS
• Senator Tom Coburn – OK
• Senator Dean Heller – NV