Rep. Neugebauer: Move the properties not the mortgages
Rep. Randy Neugebauer (R-Texas) said the Obama administration should be focused on helping the private market move through the backlog of foreclosures instead of merely shifting wealth from investors to borrowers in the new refinancing changes announced this week.
The Federal Housing Finance Agency announced new changes to the Home Affordable Refinance Program designed to make it easier for some 4 million underwater borrowers, who are current on their payments, refinance into a lower-rate loan. Most Republicans remained silent on the changes so far as they wait for how much the shift will cost Fannie Mae and Freddie Mac, which already owe taxpayers $142 billion in bailouts.
"This is not a housing initiative. This is more of a stimulus plan," Neugebauer said in an interview with HousingWire Tuesday. "They're using Fannie and Freddie to stimulate the economy and what we've learned is that is not working."
House Republicans sent a letter to FHFA Acting Director Edward DeMarco last week, asking for the taxpayer cost for HARP 2.0, but his office is still working on that. Fannie and Freddie are working too on the specific guidance for the revamped program, due out by Nov. 15, but already many are doubting how effective the stimulus – as Neugebauer calls it – will be.
The Mortgage Bankers Association, JPMorgan Chase ($52.29 -0.01%) and the Mortgage Insurance Companies of America welcomed the changes and pledged a more competitive participation in the program than before.
But one of the most enticing changes – the waiver of some representation and warranty risk for banks – may end up being more watered down than previously thought.
Fannie Mae, for instance already relieves the mortgage servicer of rep and warranty risk in on the old loan file through its Refi Plus program, as long as the servicer is the same as the old loan and the borrower meets certain payment thresholds. The HARP changes also waive putback risk for lenders on new appraisals, because lenders could use the automated valuation model. According to Barclays Capital analysts, between 20% and 30% of Fannie's mortgages carry an AVM, but Freddie's coverage spans across 80% of its loans.
"From what has been stated so far, the new HARP employment and income verification process appears to be very similar to the existing one," analysts said in a note Tuesday. "As such, it is not clear whether refis will increase much, if at all, unless some other changes are made to this rep and warranty waiver related to income."
Neugebauer said the foreclosure process simply takes too long. According to Lender Processing Services ($29.71 0.16%), the mortgages currently entering the foreclosure process have been delinquent an average 611 days.
"We've got a lot of inventory in limbo here, and it continues to freeze the market place and compress prices," Neugebauer said.
The Obama administration is working on a plan to better liquidate foreclosed properties held by the government through the Department of Housing and Urban Development, Fannie Mae and Freddie Mac. Some, the president said Monday, would be converted into rentals.
Neugebauer supported the idea so long as the government doesn't dictate to private investors what should be rented, what should be sold and when.
Outside of new government cuts and calls to repeal certain provisions under the Dodd-Frank Act, ideas to fix the housing market and spur on a recovery have been scarce. But Rep. Scott Garrett (R-N.J.) will unveil a plan Thursday to ensure a return of private financing for future mortgages without government support.
Neugebauer held several talks with Garrett when developing the plan. While Neugebauer wouldn't give specifics on the plan just yet, he promised it would provide a concrete plan, something the markets have gone without since the crisis.
"I think a lot of the ideas are going to be common sense ideas," Neugebauer said. "It will give the market some certainty."
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