WASHINGTON — Democrats on the Senate Banking Committee are urging the Federal Housing Finance Agency to take more aggressive steps to allow refinancing by homeowners with Fannie Mae and Freddie Mac mortgages.
In a letter to FHFA Acting Director Edward DeMarco, the committee's 12 Democrats argued that despite the recently announced expansion of the Home Affordable Refinance Program, known as HARP 2.0, more can be done.
"Our constituents and responsible homeowners can no longer wait," the Democrats wrote in a letter dated March 30, "and as elected officials responsible for oversight of your agency, neither can we."
The two-page letter outlined three specific changes that could be made to HARP, all of which were previously raised in a recent white paper on housing by the Federal Reserve Board.
The three specific suggestions are: reducing or eliminating loan-level price adjustments for HARP refinances where Fannie and Freddie already carry credit risk; streamlining the refinance process for homeowners with more than 20% equity in their homes; and reducing the risk that Fannie and Freddie will put back mortgages to the loan originator, thereby removing disincentives to refinancing.
The letter comes at a time when some, but not all, congressional Democrats are pressuring the FHFA to start reducing mortgage principal in cases where the homeowner has stopped paying and owes more than the home is worth.
The push to allow more refinancing is considered less controversial than principal reductions because it should lower the risk that the mortgage will go into default, and it doesn't require Fannie and Freddie to take upfront losses.
Signing the letter were Banking Committee Chairman Tim Johnson, plus committee members Jack Reed, Charles Schumer, Robert Menendez, Daniel Akaka, Sherrod Brown, Jon Tester, Herb Kohl, Mark Warner, Jeff Merkley, Michael Bennet, and Kay Hagan.