Senators Offer FHFA Suggestions for HARP Program Adjustments

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On March 30, Senate Banking Committee Democrats, led by Chairman Tim Johnson, sent a letter to Acting Director of the Federal Housing Finance Agency, Edward DeMarco, suggesting changes to the Home Affordable Refinance Program (HARP) to facilitate additional refinancings. In their letter, the Senators endorsed policy changes suggested in a January 2012 Federal Reserve Board white paper, including (i) reducing or eliminating remaining loan-level price adjustments for HARP refinances where Fannie Mae and Freddie Mac already carry the credit risk on the original mortgage, (ii) streamlining the financing process for borrowers with loan-to-value ratios below 80 percent, and (iii) more comprehensively reducing putback risk in order to remove disincentives for servicers to refinance. The letter was in response to a request for suggestions that Mr. DeMarco made during a February 28, 2012 Senate Banking Committee hearing.

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