A government program that helps struggling homeowners take advantage of low interest rates to cut monthly mortgage payments is providing an unexpected revenue boost to large banks such as Wells Fargo and J.P. Morgan Chase.
Banks that collect those payments, known as mortgage servicers, could get as much as $12 billion in revenue this year refinancing mortgages under the federal Home Affordable Refinance Program, or HARP, according to data compiled by Nomura Holdings Inc…
…Federal officials last year revised the HARP program in a bid to encourage banks to refinance borrowers who were current on their payments but owed more than their properties were worth.
The revisions have driven a sharp increase in refinancings… But some critics…say the changes risk making HARP a giveaway to big banks.
That is because the new HARP rules make it easier for borrowers to refinance their loans with existing lenders. That, the critics say, allows large lenders to charge a captive customer base above-market interest rates on the refinanced loans…
“There’s essentially a monopoly on refinancing,” Housing and Urban Development Secretary Shaun Donovan said at a Senate hearing last month. For borrowers, Mr. Donovan said, “Whoever holds their current loan, whoever is the servicer, they can charge them—and we’re seeing this—very high fees.”
We may be skating on very thin ice here, but the weight of the evidence still supports a weak bull case for the near to intermediate term. So I’m adding buy picks on the chart pick list and adjusting trailing stops to account for the risk.
These reports are not investment advice. They are for informational purposes, for a broad audience of investment and trading professionals, and other experienced investors and traders. Chart pick performance changes week to week and past performance may not indicate future results, as you know. Trading involves risk, and these reports assume that you understand those risks and manage them according to your tolerance.