United States Senators Barbara Boxer (D-CA) and Johnny Isakson (R-GA) joined eight of their colleagues in urging the Obama Administration to ensure that the greatest number of borrowers possible are able to take advantage of the newly-announced housing reforms to streamline the refinancing process and reduce costs. Specifically, the Senators requested that the proposed reforms be extended to higher equity borrowers with non-delinquent Fannie Mae or Freddie Mac-backed loans, arguing that these borrowers should have the same access to simple, low-cost refinances as those targeted by the Home Affordable Refinance Program (HARP).
In a bipartisan letter to top administration officials, including U.S. Department of Housing & Urban Development (HUD) Secretary Shaun Donovan, U.S. Department of the Treasury Secretary Timothy Geithner, National Economic Council Director Gene Sperling and Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco, the Senators wrote, “Not only is this an issue of fairness, but applying these measures to higher equity borrowers makes good business sense. Allowing banks to have a single set of rules for all borrowers will simplify the process and encourage greater participation in the program.”
In addition to Sens. Boxer and Isakson, the letter is signed by Sens. Robert Menendez (D-NJ), Jeff Merkley (D-OR), Sheldon Whitehouse (D-RI), Mark Begich (D-AK), John Kerry (D-MA), Scott P. Brown (R-MA), Ron Wyden (D-OR) and Frank Lautenberg (D-NJ).
The complete text of the letter appears below:
Dear Secretaries Geithner and Donovan, Director Sperling, and Acting Director DeMarco:
The changes announced last week to the Home Affordable Refinance Program (HARP) were an important step forward toward lowering the barriers that have kept responsible borrowers trapped in higher interest loans. It is critical to both the housing market and the overall economy that as many borrowers as possible have access to today’s historically low interest rates.
In addition to removing several barriers specific to underwater borrowers, the expanded program also made several important changes to streamline the underwriting process and reduce the costs of refinancing. Removing appraisal requirements in certain conditions as well as eliminating or lowering other fees will significantly reduce closing costs and ease the refinancing process.
While we applaud these measures, they should be expanded to include borrowers with more equity in addition to those with little or no equity. As currently structured, these reduced costs would apply only to HARP-eligible borrowers with less than 20 percent equity, a pool of approximately three to four million. However, there are nearly 12 million additional loans guaranteed by Fannie Mae and Freddie Mac with greater equity paying interest above five percent that could benefit from a refinance. These borrowers should have the same access to simple, low-cost refinances as those targeted by HARP.
Not only is this an issue of fairness, but applying these measures to higher equity borrowers makes good business sense. Allowing banks to have a single set of rules for all borrowers will simplify the process and encourage greater participation in the program.
As you prepare the final rules for the announced changes, we urge you to apply the streamlined process and reduced costs as broadly as possible, and to include all responsible homeowners no matter what their level of equity.
John F. Kerry
Scott P. Brown
Frank R. Lautenberg