U.S. Senators Barbara Boxer (D-CA), Bob Menendez (D-NJ) and Herb Kohl (D-WI) today sent a letter to Kim Garland, the CEO of mortgage insurer United Guaranty Corporation, urging him to reconsider the company's policies that are limiting or preventing homeowners from being able to refinance at today's record low rates.
Currently United Guaranty is the only mortgage insurer that has not agreed to voluntarily remove barriers to refinancing in response to changes made to the Home Affordable Refinance Program (HARP) last October. All the other mortgage insurers have concluded that helping underwater borrowers refinance at lower rates benefits all parties -- homeowners reduce their monthly payments and their risk of default, mortgage insurers lower their risk of exposure and their likelihood of paying out a claim, and taxpayers benefit as fewer Fannie Mae and Freddie Mac loans go into foreclosure.
In the letter, the Senators wrote, "United Guaranty's policies are harmful both to your customers and to the taxpayers who have provided generous support to Fannie Mae and Freddie Mac. This is particularly troubling given that United Guaranty is a subsidiary of American International Group (AIG), which itself has benefited from taxpayer assistance."
Senators Boxer, Menendez and Kohl also asked Garland to respond to a series of questions to explain why United Guaranty has taken a "different path" that diverges from the "industry consensus that removing barriers to refinancing is good for business." The Senators urged Garland to change the company's policies to "allow your customers the same opportunities to refinance that customers of every other mortgage insurance company already enjoy."
Senators Boxer and Menendez are the authors of the Responsible Homeowners Refinancing Act, legislation that would help remove remaining barriers that are keeping borrowers who are current on their payments from refinancing their loans.
The full text of the Senators' letter and their questions to United Guaranty are included below:
June 27, 2012
Mr. Kim Garland
Chief Executive Officer
United Guaranty Corporation
601 108th Ave, NE, Suite 700
Bellevue , WA 98004
Dear Mr. Garland:
We are writing to express our strong disappointment that United Guaranty continues to be the only mortgage insurer to limit the ability of its customers to take full advantage of the Home Affordable Refinance Program (HARP), which can save homeowners thousands of dollars by helping them refinance at today's record low rates.
As part of the changes announced to HARP in October of last year, all other mortgage insurers chose to do the right thing for their customers, taxpayers, and their own bottom line by voluntarily removing barriers to refinancing. These companies recognized that when underwater borrowers are permitted to lower their rates, everyone benefits. Homeowners reduce their monthly payments and their risk of default. Mortgage insurers lower their risk exposure and the likelihood they will have to pay out a claim. And taxpayers benefit when fewer Fannie Mae and Freddie Mac loans go into foreclosure.
Unfortunately, your company has taken a different path. Despite the industry consensus that removing barriers to refinancing is good for business, United Guaranty has claimed that doing so would provide it no such benefit. Our staffs have made repeated requests for the data to evaluate this claim, but have yet to receive a response. Instead, United Guaranty continues to impose additional requirements and fees on lenders who wish to refinance their customers, thereby limiting or preventing homeowners from being able to lower their payments.
United Guaranty's policies are harmful both to your customers and to the taxpayers who have provided generous support to Fannie Mae and Freddie Mac. This is particularly troubling given that United Guaranty is a subsidiary of American International Group (AIG), which itself has benefited from taxpayer assistance.
We request that you respond immediately to the attached questions and that you change your current policy and allow your customers the same opportunities to refinance that customers of every other mortgage insurance company already enjoy.
United States Senator
United States Senator
United States Senator
QUESTIONS FOR UNITED GUARANTY
* How many loans does United Guaranty currently have in force?
* How many would be eligible for HARP (i.e., GSE loans, current on their payments, issued prior to June 2009)?
* We understand that UG already has stated that it will waive reps & warrants for loans from 2003 and prior or that it originally underwrote. How many loans is that?
* Several other MIs have clarified their master policies, saying they will not rescind loans that have made their first 36 payments on time. Does UG have the same policy? If so, how many would that exclude? (If not, why not?)
* Of that remaining pool of HARP eligible loans that are "rescindable," how many would UG expect actually to HARP?
* How many of these "rescindable" HARP loans would be through the same servicer and how many with a different servicer?
* How many of these "new servicer" HARP loans would go to claim?
* Of these claims how many would you estimate you will rescind? * How much would UG save based on its average claim?