A current government program made to help struggling homeowners cut their monthly mortgage payments by taking advantage of the current low interest rates is providing a boost to the banks with the biggest holdings in the real estate market including Wells Fargo, J.P. Morgan and U.S. Bancorp.
These mortgage servicers are looking to get $12 billion in revenue from all the refinanced mortgages under the federal Home Affordable Refinance Program, or HARP, this year.
However, there is also a benefit to the borrowers who refinance through HARP this year – they will save between $2.5 billion and $5 billion.
HARP was revised last year by federal officials to get big banks to refinance loans by borrowers who were current on their payments but were also underwater on their mortgages. The revisions have driven a large increase in refinancings this year, compared to the last couple of years during which HARP fell short of government projections.
Despite the savings for homeowners, the program has many critics, including members of the Obama administration and Shaun Donovan, the Housing and Urban Development (HUD) Secretary. Their concerns are that HARP is essentially a giveaway to big banks. For borrowers, Donovan is concerned that the holder of the current loan “whoever is the servicer, they can charge them—and we’re seeing this – very high fees.”
It is already known that banks have been charging HARP borrowers as much as 0.53% more than the going market rate on refinanced mortgages. Officials at the Federal Housing Finance Agency (FHFA), the independent regulator running the program, said the premium is much smaller for Fannie Mae borrowers.
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Do you think that HARP is just a way for big banks to make more money off of troubled homeowners or do you think this is the best program available for those who owe more than their home is worth?