Freddie Mac announces new refinance effortby Tim Manni
Freddie Mac announced Tuesday that they plan to “build on the success” of HARP “by aligning requirements for mortgages with loan-to-value ratios that are equal to or less than 80 percent with those for mortgages with LTV ratios greater than 80 percent.”
As was the case with HARP 2.0, Freddie’s recent refinance changes will again seek to eliminate representation and warranties. “Reps and warranties” define lender obligations when a loan goes bad. Since HARP 2.0 already aims at shifting responsibility from the banks to the government, it’s unclear at this time what more this update will try to accomplish reagrding reps and warranties. Perhaps whereas as HARP 2.0 sought to shift some or most of the reps and warranties from lenders to the government, this update seeks to eliminate them entirely for banks.
According to Freddie Mac, details won’t be released to lenders until mid-September.
A few facts
Here are some “news facts” included in Freddie’s press release:
- The pending Relief Refinance Mortgage changes are intended to eliminate operational complexities and streamline the program so lenders can make refinancing more accessible to borrowers with Freddie Mac owned- or guaranteed mortgages.
- The HARP 2.0 component of the Relief Refinance program is targeted to borrowers with LTVs above 80 percent.
- The program changes are based on lender feedback on HARP 2.0, the enhanced version of the original HARP program announced by FHFA in November 2011.
“Once implemented the changes will give lenders a new measure of certainty and ease when they help borrowers with Freddie Mac owned- or guaranteed- mortgages take advantage of today’s historically low mortgage rates,” said Paul Mullings, senior vice president and interim head of single family at Freddie Mac.
“This will help us build on the success of the HARP 2.0 and Relief Refinance Mortgage programs of helping more than 1.3 million Freddie Mac borrowers. Today’s announcement further underscores Freddie Mac’s vital role in making affordable mortgage financing available to America’s homeowners and future homebuyers.”
No principal reductions for Fannie, Freddie
In other Fannie and Freddie news, the GSEs’ regulator has decided not to use principal reductions as a tool to help struggling homeowners.
“We concluded that the potential benefit was too small and uncertain, relative to the known and unknown costs and risks,” said Edward J. DeMarco, acting director of the Federal Housing Finance Agency.
Safe to say, many in the Obama Administration are quite disappointed. Treasury Secretary Timothy Geithner made his opinions known in a letter to DeMarco on Tuesday.
I’m sure that the lack of principal reductions will only force Freddie and Fannie to explore even more and more ways to expand their refinance efforts.
More to come…