July 2012

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THE LATEST ORIGINATION million loans, saving borrowers a total of $4.5 billion to $4.8 billion per year, which translates to about $2,800 per year for each individual homeowner, according to testimony from NAR President Moe Veissi. Veissi supports the Responsible Homeowner Refinancing Act of 2012 and stated that policymakers should do what they can to promote homeownership, which he said "is inextricably linked to a healthy community and a healthy American economy." Bill Emerson, CEO of Quicken Loans, also spoke in support of the bill, stressing the importance of leveling the playing field for originators in refinance actions. Under HARP 2.0, a loan's 2.0 Nets Industry Backing Diverse groups, including Moody's Analytics and the National Association of Realtors, show support for alterations to the government's refinancing initiative. T Robert Menendez (D-New Jersey) and Barbara Boxer (D-California), received backing from witnesses at a Senate Banking Committee hearing. The bill aims to address what he Responsible Home- owner Refinancing Act of 2012, introduced in recent weeks by Sens. tee, Menendez said, "The goal of the bill is very simple. Any homeowner with a Fannie or Freddie loan should be able to get a preapproved package in the mail from [his or her] lender, sign on the dotted line, and auto- matically be put into a refinanced loan that saves hundreds of dol- lars a month. No more lending the senators say are barriers impeding the success of the recently revised Home Affordable Refinance Program, commonly referred to as HARP 2.0. Speaking before the commit- bureaucracy. No more red tape." The bill aims to eliminate all upfront fees and appraisal costs for refinances, prohibit second- lien holders from unreasonably hindering refinances, and penalize mortgage insurers who refuse to transfer coverage to refinanced loans without due cause. The bill also addresses specific competition barriers inherent in HARP 2.0. The original HARP, introduced by the administration in 2009, aimed to refinance loans for 4 million to 5 million homeowners. To date, about 1.2 million homeowners have refinanced their loans through HARP, according to testimony from Mark Zandi, chief economist and co-founder of Moody's Analytics. A little more than 100,000 of those refinances have gone to underwater homeowners. Senate Proposal to Revise HARP disappointment," according to Zandi. However, Zandi did note that the changes set forth in HARP 2.0 are an improvement, and he projects the revised program will help 2.5 million to 3 million homeowners. "Policy steps to facilitate more So far, HARP has been "a refinancing are among the most straightforward ways to help the housing market and the economy," Zandi stated during the hearing. Given the progress of HARP 2.0, Zandi says HARP should be extended to all Fannie and Freddie loans, adding that, "We should do it quickly because mortgage rates are very low, and this is such a good time to refinance." The National Association of current servicer can refinance the loan without income or asset verification, while a new originator must go through the full underwriting process, exposing it to more risk. "Because the new originators have more difficult underwriting requirements than some servicers, the new originators bear a much higher degree of repurchase risk via their representations and warranties," Emerson stated in his written testimony The result, he says, is a reluctance among originators to participate in HARP 2.0. Emerson also suggested that large servicers do not have the capacity to refinance the millions of eligible loans they currently service. The new bill will level the playing field for originators, expanding HARP's impact, according to Emerson. While the bill's sponsors and the panelists insist the refinances will come at no cost to taxpayers, "there is a loser in this, and that's the investor," Zandi stated. However, Zandi says mortgage- backed securities (MBS) investors are aware of and account for prepayment risk. Furthermore, so far, MBS investors have been perhaps the greatest beneficiaries of government policy throughout the financial crisis, according to Zandi. The bill proposed by Menendez Realtors (NAR) predicts the new bill would aid in refinancing 3 and Boxer is one of three recent proposals to increase refinancing options for Americans. THE M REPORT | 43 ORIGINATION SERVICING ANALYTICS SECONDARY MARKET

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