Real Estate Information Archive


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FHFA issued a notice Wednesday to warn of the controversial use of eminent domain recently proposed in San Bernardino County.

In San Bernardino County, officials are considering the use of eminent domain to seize underwater mortgages. The mortgages would be taken at fair market value, and then restructured into new loans with terms reflecting the current market. Chicago and Berkeley are also exploring the proposed use of eminent domain.

In the notice, which was sent to the Federal Register, FHFAstated it had “significant concerns about the use of eminent domain to revise existing financial contracts and the alteration of the value of Enterprise or Bank securities holdings.”

FHFA said that in relation to the Fannie Mae and Freddie Mac, the use of an eminent domain program could result in a cost to taxpayers.

FHFA also stated it had significant concerns regarding a “chilling effect on the extension of credit to borrowers seeking to become homeowners and on investors that support the
housing market.”

As conservator for the GSEs and as a regulator for Federal Home Loan Banks, FHFA stated it may need to take action “to avoid a risk to safe and sound operations and to avoid taxpayer expense.”

Along with concerns, the agency also raised several questions, including the constitutionality of the proposed use of eminent domain; the effects on holders of existing securities; and the impact on millions of negotiated and performing mortgage contracts.

FHFA said it is accepting input on topic through its Office of General Counsel (OGC) no later than September 7, 2012.

Views on the topic may be emailed to [email protected] or sent to FHFA OGC, 400 Seventh Street SW., Eighth Floor, Washington, D.C. 20024. Input may be made public.



FHFA: HARP Accounts for Record 33% of June Refinances

by Tory Barringer

HARP-assisted refinances drove record refinance activity in the month of June, FHFA revealed Tuesday.

The agency released its Refinance Report for June 2012, showing that refinance volume remained strong in June as mortgage rates fell to all-time lows. An estimated 33 percent of refinance volume was done through HARP, the highest percentage since HARP’s inception.

The report revealed that at the end of June, Freddie Mac and Fannie Mae had refinanced 422,969 loans throughHARP in 2012, more than the estimated total of 400,000 for all of 2011. This brings the total number of HARPrefinances by the GSEs to 1.4 million.

In addition to record-low mortgage rates, FHFA attributed the increased HARP volume to enhancements made to the program in late-2011. The newly-enhanced program, called HARP 2.0, removes the loan-to-value (LTV) ceiling for borrowers refinancing into fixed-rate loans and eliminates or lowers fees for some borrowers.

HARP refinances for loans with LTV ratios greater than 125 percent sharply increased in June, making up more than 40 percent of total HARP volume. Lenders began selling Fannie Mae and Freddie Mac securities containing these loans starting June 1.

Additionally, data showed that more than two-thirds of borrowers in Nevada, Arizona, and Florida-the states hit hardest by the housing downturn-refinanced throughHARP in June, compared to 33 percent nationwide.

Underwater borrowers (those with LTV ratios greater than 105 percent) made up 62 percent of HARP volume in June, a 32 percent increase from May. These borrowers made up more than 80 percent of HARP volume in Arizona, Florida, and Nevada. In Idaho and California, they represented more than 70 percent of HARPrefinances.

An estimated 18 percent of underwater borrowers nationwide opted for the shorter 15- and 20-year mortgages, a slight drop from 19 percent in May. Shorter mortgages build equity faster than traditional 30-year mortgages.


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