By helping home owners refinance their mortgages into low interest rates, banks are finding unexpected profits.
Banks stand to earn as much as $12 billion in revenue this year by refinancing mortgages under the government program known as Home Affordable Refinance Program (HARP), Nomura Holdings Inc. estimates.
The government revised its HARP program last year to encourage more banks to refinance mortgages of underwater home owners, helping these home owners take advantage of record low interest rates and cut their monthly mortgage payments. But critics say the change in the HARP rules make it easier for borrowers to refinance their mortgages with their existing lender, who may not always offer the best rates.
"There's essentially a monopoly on refinancing," said Shaun Donovan, secretary of Housing and Urban Development. "Whoever holds their current loan, whoever is the servicer, they can charge them—and we're seeing this—very high fees."
The Wall Street Journal reports that some banks are charging HARP borrowers up to 0.53 percentage points more than the market rate on refinanced loans. Meanwhile, the Federal Housing Finance Agency says they charge around 0.1 percentage points, on average, for Fannie Mae borrowers.
Bank giants, such as Wells Fargo and Bank of America, told The Wall Street Journal that they offer competitively priced refinancing options to their customers.
The Obama administration, however, is pushing lawmakers to make it easier for borrowers to refinance with different lenders.
Source: “Homeowner Aid Boosts Big Banks,” The Wall Street Journal (June 17, 2012)
Banks stand to earn as much as $12 billion in revenue this year by refinancing mortgages under the government program known as Home Affordable Refinance Program (HARP), Nomura Holdings Inc. estimates.
The government revised its HARP program last year to encourage more banks to refinance mortgages of underwater home owners, helping these home owners take advantage of record low interest rates and cut their monthly mortgage payments. But critics say the change in the HARP rules make it easier for borrowers to refinance their mortgages with their existing lender, who may not always offer the best rates.
"There's essentially a monopoly on refinancing," said Shaun Donovan, secretary of Housing and Urban Development. "Whoever holds their current loan, whoever is the servicer, they can charge them—and we're seeing this—very high fees."
The Wall Street Journal reports that some banks are charging HARP borrowers up to 0.53 percentage points more than the market rate on refinanced loans. Meanwhile, the Federal Housing Finance Agency says they charge around 0.1 percentage points, on average, for Fannie Mae borrowers.
Bank giants, such as Wells Fargo and Bank of America, told The Wall Street Journal that they offer competitively priced refinancing options to their customers.
The Obama administration, however, is pushing lawmakers to make it easier for borrowers to refinance with different lenders.
Source: “Homeowner Aid Boosts Big Banks,” The Wall Street Journal (June 17, 2012)
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