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Have you noticed what's going on around us in the real estate world lately?
One of the smartest things you can do is to stay sharply on top of the latest news, trends and tremors in our industry. And of course, one of the awesomest things we can do is to help you accomplish this.
Accordingly, Mogul’s own John Grant – our lobbyist in Washington – has provided us today with a timely update on three of the hottest “pressure points” currently affecting real estate investors like you …
HARP Program Declines for Third Straight Quarter
Earlier this year, during one of our meetings to discuss the shadow housing inventory and the overall state of the market, one top housing official quipped, “We can’t modify our way out of this!” Now, recent results from existing government programs aimed at helping distressed borrowers seem to demonstrate the remark was prescient.
For the third straight quarter, refinances through the Federal Housing Finance Agency’s (FHFA) Home Affordable Refinance Program (HARP) have declined.
During the second quarter of 2013, HARP refinances stood at just under 280,000. For the sake of comparison, we note that over 2.7 million refinances have taken place under HARP since the program began in April 2009.
To provide perspective on the overall condition of the market and refinancing efforts, here are some highlights from the latest report:
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HARP volume represented about 22% of total refinance volume in the second quarter.
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Approximately 19% of HARP refinances were for borrowers with a loan-to-value ratio greater than 125%.
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Borrowers with a LTV ration greater than 105% accounted for 43% of the volume of HARP loans.
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In Nevada, HARP refinances accounted for 59% of all refi volume, while in Florida HARP refinances accounted for 50% of volume.
A complete report on the performance of HARP can be found at http://www.fhfa.gov.
FHFA Seeks Cut in Fannie, Freddie Loan Limits
In the immediate aftermath of the housing crisis, regulators raised the conforming loan limits at Fannie Mae and Freddie Mac in 2008, in order to help ensure mortgage liquidity. Five years removed, FHFA now seeks to reduce those same conforming loans limits, which will make obtaining larger loans more difficult and expensive – unless the private market steps up to the plate.
And FHFA’s goal is precisely that: for the private market to step up and to reduce the overall footprint of Fannie and Freddie in the U.S. mortgage market.
FHFA plans to gradually reduce conforming loan limits, in order to wind down Fannie and Freddie and reduce taxpayer exposure. Currently, in most markets Fannie and Freddie cannot back loans of more than $417,000. However, in some expensive markets such as Washington, D.C. and New York, the cap is as high as $625,000. (In Hawaii the cap reaches as high as $721,050.)
Analysts do expect the private market can cover the jumbo loan demand, and Congressional testimony on housing reform has promoted the notion of Fannie and Freddie leaving the jumbo loan market. For groups such as ours that are seeking meaningful housing reform from Congress, FHFA’s decision provides another positive signal that regulators – and ultimately Congress – are serious about unwinding Fannie and Freddie.
States Eye Servicer Regulation
Mortgage-related litigation has made national headlines over the past several years, and more lawsuits against banks are expected.
In July, UBS Americas paid FHFA $885 million to settle claims over toxic residential mortgage-backed securities sold to Fannie and Freddie. Even more recently, the Office of Comptroller of Currency (OCC) announced EverBank’s agreement to pay $27 million to a group of eligible mortgage borrowers.
We are beginning to hear that servicers may be in the crosshairs as well – not in terms of litigation, but rather new regulations. Based on conversations I have had with sources in both Washington and New York, new regulation would focus on issues impacting consumers and risks regarding the mortgage servicing transfer process. We suspect that the Consumer Financial Protection Bureau (CFPB) or FHFA may be discussing possible new regulations for servicers.
John Grant
is the president of the Distressed Property Coalition, a private advocacy effort formed by the top leaders in the residential real estate industry, and dedicated to private market solutions, smaller government, and protecting taxpayers. DPC exists because investors deserve an easier path to buy and sell houses. Investors deserve to shape policies that govern them, not to be subjected to them. Investors deserve better information on current laws and policies. Investors deserve a safe environment to learn more about the industry. DPC is dedicated to providing these services to the residential real estate community. Their content and track record of success in Washington are unprecedented for this industry.
To received Mr. Grant’s policy briefings and newsletter, please visit www.distressedpropertycoalition.com