CHAIRMAN JOHNSON SPEARHEADS LETTER TO FHFA ON REFINANCING PROPOSALS
Senators offer suggestions solicited by Acting Director DeMarco
WASHINGTON – Late Friday, Senate Banking Committee Democrats, led by Chairman Tim Johnson (D-SD), wrote a letter to Federal Housing Finance Agency (FHFA) Acting Director Edward DeMarco, responding to his recent request for suggestions on steps FHFA can take to help facilitate more refinancing. The letter, signed by all twelve Committee Democrats, highlighted many of the proposals recommended to the Banking Committee by Republican and Democratic witnesses in an extensive series of hearings on the housing market.
“We appreciate your commitment to fully implement recent changes to HARP, but we believe there is more you can do today,” wrote the Banking Committee Democrats. “As members of the United States Senate, we urge you to utilize every authority Congress has empowered your agency with to increase refinancing efforts for Fannie Mae and Freddie Mac mortgages. Our constituents and responsible homeowners can no longer wait, and as elected officials responsible for oversight of your agency, neither can we.”
The full text of the letter is below.
March 30, 2012
Mr. Edward DeMarco
Federal Housing Finance Agency
400 7th Street SW
Washington, D.C. 20024
Dear Acting Director DeMarco:
We write to follow up on your request for information on additional steps FHFA can take to help more families take advantage of the extraordinarily low mortgage rates available to responsible homeowners. While a concerted effort to increase refinancing alone will not solve the entire housing crisis, such a prudent step can help stabilize our housing sector and strengthen our economic recovery as well as helping individual families.
During your February 28th appearance before the Senate Banking, Housing, and Urban Affairs Committee (the Committee), you solicited suggestions for actions that FHFA could take, beyond the HARP changes announced in October 2011, to help facilitate additional refinancing. We have heard a number of suggestions from the Administration and outside experts on such steps. For example, the Federal Reserve laid out a number of suggestions to expand Fannie Mae and Freddie Mac refinancings in a recent housing white paper sent to the Committee, including:
Reducing or eliminating remaining loan-level price adjustments for HARP refinances where the GSEs already carry the credit risk on the original mortgage;
Streamlining the financing process for borrowers with loan-to-value ratios below 80 percent; and
More comprehensively reducing putback risk in order to remove disincentives for servicers to refinance.
By increasing the affordability of mortgages already backed by Fannie Mae and Freddie Mac, such refinancing steps should even lower the default risk to the enterprises. In a February 9th hearing the Committee held on the state of the housing market, Democrats, Republicans and leading economists voiced strong support for these and other recommendations. One economist noted that the “conservator could take many other steps that would reduce the losses in foreclosures and open up credit but has chosen not to do it.” Another economist called this approach “a slam dunk. You should work very hard to facilitate more refinancing through Fannie, Freddie and FHA loans.”
We appreciate your commitment to fully implement recent changes to HARP, but we believe there is more you can do today. As members of the United States Senate, we urge you to utilize every authority Congress has empowered your agency with to increase refinancing efforts for Fannie Mae and Freddie Mac mortgages. Our constituents and responsible homeowners can no longer wait, and as elected officials responsible for oversight of your agency, neither can we.
Please respond in writing with your plans to increase Fannie Mae and Freddie Mac refinancings as soon as possible. We look forward to your prompt response.
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