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U.S. Treasury Opposes Extending Cutoff Date for HARP Refinancing

The U.S. Treasury opposes allowing borrowers with mortgages originated after mid-2009 to become eligible for the Home Affordable Refinance Program, the agency’s chief housing-finance adviser said.

Only borrowers with loans originated by May 31, 2009, are currently eligible for the HARP program, which allows homeowners with mortgages backed by Fannie Mae and Freddie Mac to refinance even if they owe more than their properties are worth.

“Very few homeowners whose loans were originated after the cut-off date are underwater and advancing the date would do more harm than good by prolonging market and investor uncertainties,” Michael Stegman, the Treasury’s housing adviser, told an audience at the Structured Industry Finance Group conference in Las Vegas.

Analysts including those at JPMorgan Chase & Co. and FBR Capital Markets predicted the cutoff date would be changed after Melvin L. Watt took over this month as director of the Federal Housing Finance Agency, regulator of Fannie Mae and Freddie Mac. Watt is a former Democratic congressman selected for the post by President Barack Obama.

Nearly 3 million homeowners have completed refinances under the HARP program, including close to 1 million who were underwater. Another 2 million borrowers could be eligible even if the cutoff date is not changed, Stegman said.

Treasury will continue to push for legislation that would allow borrowers with loans in private-label securities to be eligible for HARP, Stegman said.

Meetings Planned

Treasury officials plan to meet with regulators and market participants to discuss changes to private-label securitization, Stegman said.

Comprehensive housing finance reform “remains a top priority” for the Obama administration, he said. In the meantime, Treasury is also looking to move toward a system in which Fannie Mae and Freddie Mac issue a single security, he said.

“A good first step toward a single-security-based future system that could be taken during the transition is to reduce the price gap at which Freddie Mac securities trade relative to Fannie Mae’s securities by linking the two securities,” he said.

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