Press Release of U.S. Senator Barbara Boxer
|For Immediate Release: |
May 3, 2012
Washington D.C. Office (202) 224-3553
Boxer Calls on Federal Housing Regulator to Take Immediate Action to Help Homeowners Refinance at Historically Low Rates
Washington, D.C. – With average mortgage rates dropping to the lowest on record – 3.84 percent for a 30-year fixed loan – U.S. Senator Barbara Boxer (D-CA) today wrote a letter calling on Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco to immediately end the anti-competitive nature of the federal refinancing program, which is leaving too many homeowners paying higher rates than they should.
Currently under the Home Affordable Refinance Program (HARP), many lenders who want to compete for the business of homeowners seeking to refinance find themselves at a huge disadvantage compared to the borrower’s existing servicer. As a result, many homeowners have only one choice – refinancing through their current servicer – rather than being able to shop around for the best deal.
“This lack of competition gives some lenders a captive market and means borrowers are often stuck with higher rates and less favorable terms,” Senator Boxer wrote in the letter. “Current policy is rewarding banks with excess profits at the expense of struggling homeowners.”
In fact, a recent study by Amherst Securities Group found that HARP borrowers are paying as much as 53 basis points more than borrowers with other types of loans. On a $300,000 loan, this higher interest rate costs borrowers more than $1,200 each year, and an additional $34,500 over the life of the loan – money that could be going directly into our economy.
Senator Boxer said, “Refinancing at the lowest possible rate is a win-win for our families and for job creation.”
The Senator urged Director DeMarco to eliminate the barriers that are keeping lenders from competing with a borrower’s existing servicer to offer the best rates and terms – including stricter underwriting criteria and full representations and warranties.
The full text of the Senator’s letter follows:
May 3, 2012
The Honorable Edward DeMarco
Federal Housing Finance Agency
400 7th Street SW
Washington, DC 20024
Dear Acting Director DeMarco:
I am encouraged to see the reports of increased interest among homeowners in refinancing through the Home Affordable Refinance Program (HARP) as a result of recent changes to the program that you have undertaken.
However, I am greatly concerned about the lack of competition within HARP that means even those homeowners who are able to refinance continue to pay higher rates than they should.
Under HARP, lenders looking to compete with a borrower’s existing servicer continue to face barriers to participating in the program, including stricter underwriting criteria and full representations and warranties. As a result, many homeowners are being forced to refinance through their existing servicer, instead of being able to shop around for the best deal.
This lack of competition gives some lenders a captive market and means borrowers are often stuck with higher rates and less favorable terms. A recent study by Amherst Securities Group found that HARP borrowers are paying as much as 53 basis points more than borrowers with other types of loans. On a $300,000 loan, this higher interest rate costs borrowers nearly $100 more each month, and an additional $34,500 over the life of the loan. Current policy is rewarding banks with excess profits at the expense of struggling homeowners.
To level the playing field and unlock competition between banks for borrowers’ business, FHFA should allow the same streamlined underwriting and associated representations and warranties for new servicers as they do for current servicers. Such competition will help ensure that the benefits of today’s historically low rates flow to homeowners, and not to the banks.
By taking these common-sense steps to help homeowners obtain the lowest rates possible, we will also help prevent foreclosures and strengthen our economy. I urge you to continue your efforts to expand streamlined refinancing opportunities to all responsible borrowers and look forward to hearing your response.
United States Senator