National Real Estate Investor
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J.P. Morgan Chase & Co. (JPM) has seen a surge in residential loans refinanced through a flagship government mortgage program after the U.S. housing regulator ushered through revisions late last year, approved a Chase capital markets executive said on Tuesday. “We’ve seen a gigantic jump” in loans refinanced through the Home Affordable Refinance Program, thumb or HARP, prescription said Garry Cipponeri, director of capital markets for Chase Mortgage Banking.
The rise in refinancings has come even before the bank has fully implemented the program’ revisions, including streamlining the process for borrowers with deeply underwater loans, Cipponeri told Dow Jones Newswires after speaking at the American Securitization Forum’s conference in Las Vegas. Under the new plan, the Federal Housing Finance Agency, which regulates government-owned mortgage-securities issuers Fannie Mae and Freddie Mac, will allow refinancing of loans guaranteed by those agencies no matter the home’s value. The FHFA also will extend the term of HARP though 2013 and will waive some liabilities to banks, giving the lenders more incentive to close loans with risky characteristics.
The FHFA broadened the program after finding in late 2011 that just 894,000 borrowers used the HARP since its unveiling in 2009. The FHFA has said the changes may at least double the number of homeowners who enroll. Barclays Capital estimated up to 3.1 million loans are eligible for the program. Investors are hungry for evidence of the new HARP’s effectiveness because faster refinancing can reduce returns on bonds in the $5 trillion market where Fannie Mae and Freddie Mac mortgage-backed securities trade.
Investors would like to own MBS paying relatively high rates of interest, such as 6%, but loans backing those bonds are also most likely to meet new requirements of HARP. Investors are most-closely watching the results from Bank of America (BAC) whose refinancings have been slower for loans it services. When a loan is refinanced, the principal is handed back to the investor ahead of schedule, forcing reinvestment at lower rates. The prepayment at face value also causes a mark-down to the securities which are trading at 108 cents on the dollar, and above.
Cipponeri said agreements by mortgage insurers to streamline the way they transfer policies to the new loan in a refinancing is speeding efforts for Chase. The bank’s HARP loans have made up about 38% of the mortgages processed by insurer MGIC (MTG), whose book is just 10% Chase loans, he said. The revised HARP hasn’t quieted some lawmakers’ calls for an even more expansive government refinancing effort for Americans who have been current in mortgage payments and unable to tap record low rates.
Pressure on banks from various officials to make HARP work better has been palpable, with some calling the bank for results just weeks after the plan was put to work, he said. “These guys are impatient,” he said. President Barack Obama called on Congress during Tuesday’s State of the Union address to approve new legislation that would give all homeowners who are current on their mortgages the opportunity to refinance at record low mortgage rates, officials said Tuesday.
Administration officials declined on Tuesday ahead of the address to outline the mechanics or costs of the program, and they said those details would be spelled out in the legislation in the coming days. “Responsible homeowners shouldn’t have to sit and wait for the housing market to hit bottom to get some relief,” Obama said. “No more red tape. No more runaround from the banks.”
Mortgage Rates: Low Mortgage Rates Hold On as Stocks Surge on Fiscal Deal
FHA 5/1 ARM loan rates are as low as 2.500%. FHA mortgages accept low down payments and offer flexible credit guidelines so that low to middle income consumers can move to homeownership. While underwriting is required, information pills either automatic or manual, approved …
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