On the recordMarch 10, 2011
The FHA Refinance Program proposed for termination in today's legislation is designed to provide distressed homeowners mortgage relief by using FHA loan guarantee authority to incentivize holders of existing single family loans to reduce the outstanding principal balance of their loans by at least 10% in conjunction with an FHA refinance when the principal balance of a borrower's loan is greater than the property's current value. Importantly, participating homeowners must be current on their existing loan, and all other FHA safety and soundness underwriting standards continue to apply. Any losses under the program are covered by funds already set aside by the TARP, adding no additional exposure to the FHA's capital reserves. Mr. Chair, while I am aware of--and frankly, to some extent sympathetic to--the criticism and frustration around the pace and scope of this program to date, I would also point out that it has only been operational since October of last year. Furthermore, as a purely voluntary program, its success clearly hinges on the active participation of our major loan servicers, two of whom--Wells Fargo and Ally Financial--have just recently announced their intention to let qualified borrowers take advantage of the program. Finally, with an estimated one in five homeowners currently underwater on their mortgages, it is clear to me that the housing crisis is not yet behind us.
