1001 PENNSYLVANIA AVENUE, N.W.
SUITE 500 SOUTH
WASHINGTON, D.C. 20004
Tel. 202.289.4322
Fax 202.289.1903
John H. Dalton
President
Tel: 202.589.1922
Fax: 202.589.2507
E-mail: johnd@fsround.org
The Honorable Timothy Geithner
Secretary
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
September 19, 2011
Re: Changes to HARP to assist more homeowners
Dear Secretary Geithner:
The Housing Policy Council was pleased when the President spoke about helping responsible
homeowners in his speech on September 8. We support efforts by the Administration to stabilize
the housing market and help it to contribute to positive growth in the economy. During the recent
crisis, homeowners lost $6.5 trillion in equity that has yet to return. 1 Fourteen million homeowners
remain underwater on their mortgages. 2 We welcome new ideas and new initiatives that will result
in revitalization of the housing market, and, we want to contribute to the effective development and
implementation of worthwhile initiatives.
We recommend that the Administration consider modifications in the existing Home Affordable
Refinance Program (HARP). HARP can be improved to increase its effectiveness, and this would
be a more efficient approach rather than seeking to create a new refinance program.
In a recent speech, Federal Reserve Governor Elizabeth Duke said that more than more than
800,000 borrowers have used HARP, but that an estimated 4 million borrowers appear to meet the
basic eligibility for HARP refinancing. In order to help facilitate the use of HARP and to provide
additional options for the more than 14 million homeowners under water, the Housing Policy
Council recommends the following changes to HARP:
A. Increase LTV above 125%: Borrowers in some markets owe more than 125% of the value
of their home. More of these homeowners could potentially be assisted by increasing the
HARP LTV eligibility to include homeowners who are current on their loans, but have a
mortgage with an LTV above 125%.
1
Zandi, Mark. “To Shore Up the Recovery, Help Housing.” Moody’s Analytics. May 25, 2011.
http://www.economy.com/mark-zandi/documents/To-Shore-Up-the-Recovery-Help-Housing.pdf
2
Ibid.
B. Reduce or eliminate loan-level pricing adjustments (LLPAs) imposed by the GSEs:
eliminate the added-on fees that the GSEs charge that can increase refinancing costs for
loans with high LTVs. The Federal Reserve has also noted that LLPAs are a constraint and
can increase the cost of refinancing by thousands of dollars, thus discouraging borrowers
from participating in HARP. 3
C. Repurchase Demands on HARP Qualified Loans should be limited: If a loan qualifies
for a HARP refinance, there should not be any repurchase demands based on issues related
to the performance of the original loan, except for cases of fraud.
D. Fannie Mae and Freddie Mac should be required to have identical HARP programs.
Under current practices, the two housing GSEs have different elements in their HARP
programs. Insisting that they be identical would eliminate unnecessary complications in the
two programs and simplify use of HARP for all other participants in the program. For
example, Freddie should adopt Fannie's policy on satisfaction of risk and warranties in
credit-related buy backs with 12 months payment history for refinances with the same
servicer. That should also be available for new servicers.
E. HARP Borrowers should be eligible for HAMP modifications: HARP borrowers are
currently not eligible for HAMP modifications. Given the current condition of the economy
and the housing market, allowing a homeowner with a HARP refinance to be considered for
a HAMP modification, if necessary, would provide addition flexibility to help distressed
homeowners
F. Servicers should be permitted to market the HARP programs. With that permission,
more borrowers would be aware of HARP and there would be more applicants for the
program. Marketing the program would also encourage more same servicer refinancing
which can be done more easily, quickly and with less representations and warranties risk.
We believe that these changes and others should be considered to make HARP available to more
homeowners who are able to pay their mortgage, but are currently not eligible to refinance. These
changes can have a positive impact and could be implemented more quickly than attempting to
create a new program. Housing Policy Council members and other lenders and servicers are
working to use a variety of programs including HAMP and EHLP. New program requirements
should be limited and administered in as simple and straightforward a manner possible to enable
servicers to incorporate them into their systems efficiently. We support an effort to improve the
HARP program.
Improving the effectiveness of HARP, however, is only one of the steps needed to address the
weakness of the housing market. As you know, the overhang of unsold properties is also one of the
main obstacles to the start of a recovery in housing. This inventory overhang consists of houses in
foreclosure; houses on which the mortgages are delinquent over 120 days, REO properties and
vacant homes that were newly constructed and never have been placed in the market successfully.
While there are many attempts to measure that overhang, we think it is in the neighborhood of 6
3
Governor Elizabeth A. Duke At the Federal Reserve Board Policy Forum: The Housing Market Going Forward:
Lessons Learned from the Recent Crisis, Washington, D.C. September 1, 2011
million units. 4
This overhang must be moved from its current status into useful active properties before the housing
sector can truly recover.
We support the initiative underway by Treasury in cooperation with FHFA and HUD to dispose of
the REO properties held by the GSEs and FHA. The Housing Policy Council is providing
comments on the Administration’s Request for Information on REO properties (attached). We
believe that a balanced program that enables the private sector and other participants to acquire and
use the GSE and FHA REO properties can also help begin to restore the health of the housing
market.
There is no perfect solution or “silver bullet” to restoring the housing market. The overall weakness
in the economy and the level of unemployment remain the largest obstacles to a full recovery.
Nevertheless, improvements to the HARP program and a more coordinated effort to reduce REO
inventories can be positive steps. We would be pleased to work with you on these and other ideas
to assist in the recovery of the housing market and the nation’s economy. If there are questions
about our suggestions, please contact Paul Leonard (202-589-1921) or Joan Gregory (202-589-
1923).
Sincerely,
John H. Dalton
President
Housing Policy Council
4
Zandi, Mark. “Housing Hits Bottom in 2011.”