Housing industry advocates back mortgage plan, call for broader action

HARP usually reduces a borrower’s monthly payment by providing a new loan at a lower interest rate.

Nielsen said the changes will probably provide a boost to consumer confidence, free up cash for some households and enable others to pay their mortgages off at a faster rate.

“Clearly, additional policy initiatives are urgently needed to prevent foreclosures and deal with the inventory of foreclosed homes,” he said.

In addition to issues tackled by Monday’s announced change, Nielsen said it is essential to address overly restrictive mortgage lending standards, inappropriate credit limitations on homebuilders and the appraisal system that is contributing to housing price instability, all detrimental to the recovery of the housing sector.

“We still have an enormous amount of work to do to repair housing,” he said. “The HARP changes are a good step, but our leaders in Washington need to quickly focus on a broader range of actions for improving the housing marketplace. It has taken a painfully long time for them to recognize that housing is indispensable to the job creation and growth that have been sorely lacking since the end of the recession.”

Housing and Urban Development Secretary Shaun Donovan said Monday that high levels of unemployment are the main reason why the housing market has been slow to recover. 

Another policy by the Obama administration that went into effect on Oct. 1 would provide unemployed workers with 12 months of forbearance on their mortgages to help them avoid foreclosure. 

Donovan said that RealtyTrac, a California-based group that closely tracks foreclosures, has credited the administration for slowing the rate of repossession, which could eclipse last year’s levels. 

In the third quarter, there were 610,337 foreclosure filings — default notices, scheduled auctions and bank repossessions. That’s an increase of less than 1 percent from the previous quarter — the first quarterly increase since the last three months of 2010, according to RealtyTrac, and a decrease of 34 percent from the third quarter of 2010. 

“U.S. foreclosure activity has been mired down since October of last year, when the robo-signing controversy sparked a flurry of investigations into lender foreclosure procedures and paperwork,” said James Saccacio, chief executive officer of RealtyTrac, on Oct. 13. “While foreclosure activity in September and the third quarter continued to register well below levels from a year ago, there is evidence that this temporary downward trend is about to change direction, with foreclosure activity slowly beginning to ramp back up.”

David H. Stevens, president and chief executive of the Mortgage Bankers Association, said the changes will allow more borrowers to qualify and streamline the process by reducing the cost to borrowers and lessening the risk for Fannie Mae and Freddie Mac.

“Lenders are particularly gratified that the refinements will provide relief from some representations and warranties that lenders face when originating new loans,” Stevens said. “These changes alone should encourage lenders to more actively participate in HARP.”

In that vein, Chase announced Monday that it will participate in the expanded program. 

“We are pleased to work with FHFA to expand the HARP program because it should help thousands of Chase customers reduce their monthly mortgage payments,” said Frank Bisignano, CEO of mortgage banking at Chase. “We estimate it could lower a family’s mortgage payments by an average of $2,500 a year, providing them more financial flexibility and improving the quality of their lives.”  

The changes eliminate certain risk-based fees for borrowers who refinance into shorter-term mortgages, remove the cap on loan-to-value — previously set at 125 percent — and extend HARP through Dec. 31, 2013.

Still, Stevens and the administration officials said the changes are still being put into place. 

“While ultimately helpful, these changes are not going to be a silver bullet to solve all the issues facing our housing market and borrowers who owe more on their mortgages than their homes are worth,” Steven said. “But they will offer lenders another tool to help borrowers and hopefully help bring some stability to housing markets, particularly those most impacted by home value declines.”

The National Community Reinvestment Coalition also called on the White House to continue pursuing changes. 

“Today’s changes to the HARP program will accelerate its effectiveness, and will be tremendously helpful,” said John Taylor, president and CEO of the National Community Reinvestment Coalition.

“But a more significant change in course may still be needed,” he said. 

He suggested re-evaluating the effectiveness of the changes in three months. 

“If the changes are not having an impact, then the administration must move more aggressively, such as by mandating servicer participation in principal reduction programs, or by directly purchasing loans and writing them down,” Taylor said.

HOPE NOW, a voluntary, private-sector alliance of mortgage servicers, investors, mortgage insurers and nonprofit counselors, also supports the changes because they will solve a major challenge of the housing market — helping homeowners who aren’t delinquent. 

“The new plan now eliminates many of the barriers for homeowners trying to refinance, including waiving many of the associated fees and eliminating the need for a new appraisal,” said Faith Schwartz, executive director of HOPE NOW.

“Most importantly, the removal of the loan-to-value (LTV) ceiling will go a long way in opening the door for homeowners with fixed rate mortgages who were unable to refinance in the past.”