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Th e M Rep o RT | 59 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t SECONDARY MARKET Department Why Haven't Half of Borrowers refinanced? Fannie Mae atteMpts to answer the question: what's held so Many borrowers back? a new commentary from Fannie Mae attempts to address a perplex- ing question: With mortgage rates down steadily in the last several years and greater opportunity for significant sav- ings, why have so many borrow- ers elected not to refinance? Approximately 40 to 50 percent of mortgage borrowers say they have not refinanced the mortgage on their current home, according to Fannie Mae's Housing Survey data collected through June 2013. Examining the topic in a study is Fannie Mae's senior manager of business strategy, Li-Ning Huang, Ph.D. According to Huang's find- ings, the top three most common reasons cited by respondents for not refinancing are: • Payment reductions too low • Closing costs too high • A desire to not lengthen loan terms The data also shows some borrowers tried to refinance in the past but were unsuccessful. According to the report, borrow- ers among that group tend to exhibit higher financial anxi- ety, doubt their ability to get a mortgage today, and hold a more pessimistic attitude overall about their future financial situation and the overall economy. Findings from the survey sug- gest that "better awareness of one's financial situation could encourage consumers to consider refinancing and to take action," Huang said. Huang noted financial educa- tion, awareness, and messaging are critical factors in encouraging troubled homeowners to refinance. Additionally, resources and tools that help build financial literacy and awareness could lead to higher rates of refinancing. report: Fannie, Freddie ignored Warnings on Potential Problem loans FhFAoIG says the enterprises spent billions despite warnings of appraisal issues. a bout four years after the Federal Housing Fi- nance Agency (FHFA) directed the GSEs to develop a uniform collateral data portal, the Office of the Inspector General of the Federal Housing Fi- nance Agency (FHFA OIG) finds the portal is not being used to its potential, and the GSEs continue to purchase loans with red flags. After "extensive" development and testing, the OIG concluded in a recent audit, "more remains to be done to use the portal's data to minimize the risk of loss." Both enterprises continue to purchase loans despite warning messages from the portal, accord- ing to a report from the OIG. Fannie Mae purchased 56,000 loans for a total of $13 billion from January through June of last year despite warnings from the portal indicating the loans might not meet the GSE's underwriting requirements, the OIG says. Meanwhile, Freddie Mac pur- chased 29,000 loans for a total of $6.7 billion from June through September despite warnings regarding the properties' valua- tions, according to the OIG. Each of the 56,000 loans purchased by Fannie Mae came with between one and nine caution messages regarding the loan's quality. The messages dealt with such issues as confirmation of repairs and "unauthorized use of single- family loan funds," according to the OIG, and in each case the warning message was disregard- ed using an automatic override. Fannie Mae purchased the loans and "focused its efforts on reviewing the loans for confor- mance with its requirements after it bought them," according to the OIG. Fannie Mae reportedly "did not require lenders to explain or resolve potential problems ranging from formatting issues to violations of its underwriting requirements," the OIG states. Similarly, Freddie Mac pur- chased more than 29,000 loans despite the portal's warning that "either no property value could be provided or the value of the prop- erty was in question," according to the OIG. In fact, in some cases the portal could not even verify that the address existed. Like Fannie Mae, Freddie Mac's approach was to override the warnings and review the loans for issues after purchasing them. In fact, Fannie and Freddie both claimed they did not want to "burden lenders with having to respond to messages," accord- ing to the OIG. The OIG audit also detected 414,000 instances in which the portal found an appraiser's license could not be verified. The "uniform collateral data portal is intended to improve appraisal data quality and risk management for the enterprises by collecting appraisal data to help them make informed deci- sions about the loans they buy," the OIG reported. "However, as demonstrated by the results of this audit, these goals are at risk of not being achieved," the OIG stated. On the bright side, the audit did cause the GSEs to consider 23 loans totaling $3.4 million for repurchase.