WASHINGTON Jan 22 The Obama administration on
Wednesday argued against expanding a program that allows some
borrowers with Fannie Mae and Freddie Mac
loans to lower their interest rates even if they owe more than
their homes are worth.
Currently, homeowners whose loans are backed by the
government-owned housing finance giants can qualify for the
program if they took out loans by May 31, 2009. Some housing
advocacy groups and lenders have lobbied to allow people to
qualify if they took out more recent loans as well.
But U.S. Treasury Department's housing adviser Michael
Stegman, in a speech delivered in Las Vegas at an industry
conference, said changing the HARP eligibility date is
unnecessary. He said altering the program would do "more harm
than good by prolonging" market and investor uncertainties.
"Very few homeowners whose loans were originated after the
cut-off date are underwater," Stegman said at the Structured
Industry Finance Group conference, according to a text of his
Nearly 3 million homeowners have refinanced under the HARP
program, including close to 1 million who owed more than their
home was worth. More than 2 million borrowers are still
HARP-eligible, Stegman said, and could refinance even if the
cutoff date is not changed.
Such a policy change would impact bond investors who might
lose money if more borrowers ended up refinancing.
Stegman also backed the creation of a HARP-like program for
non-Fannie and Freddie loans, which would help the real-estate
markets hit hardest by the housing boom and bust. The effort
would require action by Congress.
"We must not forget about the inability of performing
underwater borrowers whose loans are held in private label
security trusts to access refinancing," he said.
He said Fannie Mae and Freddie Mac are still ripe for
reform, despite the consecutive quarterly profits the companies
have posted since 2012.
It is "good news that (Fannie and Freddie) have generated
record earnings," but many of those profits are one-time gains
or the firms will see changes in their investment portfolios
since they are required to shrink by 15 percent per year going
forward, he said.
Comprehensive housing finance reform remains "a top
administration priority," he said. "We are hopeful that
comprehensive, bipartisan housing finance reform is achievable
Until Congress finds a solution to overhaul the mortgage
market, Treasury will aim to transition towards a system in
which Fannie Mae and Freddie Mac issue a single security, he
"This would reduce the cost to taxpayers and improve
liquidity," he said.
The companies almost collapsed in 2008 as a growing number
of loans they backed went sour. The government kept them alive
with $187.5 billion in taxpayer aid. They have since returned to
profitability and paid about $185.2 billion in dividends to the
government thanks to a surge in the U.S. housing market.