Giants Banks Only Accepting FHA and HARP Loan Applications From Current Clients – (BAC, JPM, WFC)


The steps taken by the White House to drive extensive refinancing of mortgages for homeowners who owe higher than the value of their properties may be restricted by banks’ stretched lending capacity and their fears that the borrowers are too risky.

The Obama administration in 2012 has called for a widespread refinancing effort to let homeowners, on average, save up to $3,000 year if they obtain loan at a minimum of 3.65 percent on a 30- year fixed-rate mortgage. The White House says Republicans in Congress may not make a move on plans that would require legislative approval and the administration has kept its focus on escalating current programs that have not been available to as many borrowers as proponents projected.

Giant banks such as Bank of America Corp (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Company (NYSE:WFC) have said they will not allow FHA streamlined applications other than from current clients. The banks have cited a failure to keep up with demand. Lenders are also not accepting applications for HARP loans except for clients whose loans they currently service and are concerned about legal responsibility they will bear if the loans sour.
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The Federal Housing Finance Agency has recently reported that May ended with 78,000 homeowners who received loans at least 5 percent more than what their homes were worth and had refinanced into lower interest rates under the new rules for the Home Affordable Refinance Program. Among those, the agency defined 11,000 borrowers as deeply underwater, owing at least 125 percent of their homes’ value.

Data provider CoreLogic revealed that nearly 2.3 million borrowers with mortgages backed by Freddie Mac and Fannie Mae might be entitled for the long-drawn-out program because they hold nearly no equity in their homes or are underwater on their loans. The expanded program was implemented in January.

Isaac Boltansky, Washington policy analyst at Compass Point Research & Trading LLC, claims that a huge division of the exact borrowers they at first wanted to reach is present. While the banks are not incentivized to take on these loans, these borrowers just have not been able to be widely reached.

The Federal Housing Administration has insured the widening restrictions to President Barack Obama’s separate attempt to boost the refinancing of loans. Last month, the FHA had cut fees in its so-called streamline refinance program, which enables borrowers who are current on their loans to acquire lower interest rates exclusive of income verification or appraisals.


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