JP Morgan Sees 'Gigantic' Jump in HARP Refinancing, Executive Says
January 24 2012 - 10:26PM
Dow Jones News
J.P. Morgan Chase & Co. (JPM) has seen a surge in
residential loans refinanced through a flagship government mortgage
program after the U.S. housing regulator ushered through revisions
late last year, a Chase capital markets executive said on
Tuesday.
"We've seen a gigantic jump" in loans refinanced through the
Home Affordable Refinance Program, or HARP, said Garry Cipponeri,
director of capital markets for Chase Mortgage Banking.
The rise in refinancings has come even before the bank has fully
implemented the program' revisions, including streamlining the
process for borrowers with deeply underwater loans, Cipponeri told
Dow Jones Newswires after speaking at the American Securitization
Forum's conference in Las Vegas.
Under the new plan, the Federal Housing Finance Agency, which
regulates government-owned mortgage-securities issuers Fannie Mae
and Freddie Mac, will allow refinancing of loans guaranteed by
those agencies no matter the home's value. The FHFA also will
extend the term of HARP though 2013 and will waive some liabilities
to banks, giving the lenders more incentive to close loans with
risky characteristics.
The FHFA broadened the program after finding in late 2011 that
just 894,000 borrowers used the HARP since its unveiling in 2009.
The FHFA has said the changes may at least double the number of
homeowners who enroll. Barclays Capital estimated up to 3.1 million
loans are eligible for the program.
Investors are hungry for evidence of the new HARP's
effectiveness because faster refinancing can reduce returns on
bonds in the $5 trillion market where Fannie Mae and Freddie Mac
mortgage-backed securities trade. Investors would like to own MBS
paying relatively high rates of interest, such as 6%, but loans
backing those bonds are also most likely to meet new requirements
of HARP.
Investors are most-closely watching the results from Bank of
America (BAC) whose refinancings have been slower for loans it
services.
When a loan is refinanced, the principal is handed back to the
investor ahead of schedule, forcing reinvestment at lower rates.
The prepayment at face value also causes a mark-down to the
securities which are trading at 108 cents on the dollar, and
above.
Cipponeri said agreements by mortgage insurers to streamline the
way they transfer policies to the new loan in a refinancing is
speeding efforts for Chase. The bank's HARP loans have made up
about 38% of the mortgages processed by insurer MGIC (MTG), whose
book is just 10% Chase loans, he said.
The revised HARP hasn't quieted some lawmakers' calls for an
even more expansive government refinancing effort for Americans who
have been current in mortgage payments and unable to tap record low
rates. Pressure on banks from various officials to make HARP work
better has been palpable, with some calling the bank for results
just weeks after the plan was put to work, he said.
"These guys are impatient," he said.
President Barack Obama called on Congress during Tuesday's State
of the Union address to approve new legislation that would give all
homeowners who are current on their mortgages the opportunity to
refinance at record low mortgage rates, officials said Tuesday.
Administration officials declined on Tuesday ahead of the
address to outline the mechanics or costs of the program, and they
said those details would be spelled out in the legislation in the
coming days. "Responsible homeowners shouldn't have to sit and wait
for the housing market to hit bottom to get some relief," Obama
said. "No more red tape. No more runaround from the banks."
-By Al Yoon, Dow Jones Newswires; 212-416-3216;
albert.yoon@dowjones.com
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