For years American homeowners struggling to make monthly payments on their mortgages have been imploring the federal government to step in and provide some relief. That relief first came in 2009 in the form of Home Affordable Refinance Program, or HARP, and recent changes to the program have allowed it to be utilized in higher numbers.
Homeowners are not the only ones benefitting from these programs, however, as the big banks providing these mortgages are reaping the benefits of refinancing.
The HARP program was originally introduced in order to provide some help for homeowners who owed more on their mortgage than their property was worth. As has been greatly publicized, the overvaluation of homes played a significant role in the economic crash of 2008.
This federal program allows homeowners who are current on their mortgage payments to refinance but only with their existing lender. The demand has been so high in the last year that big banks have been able to charge above-market interest rates to these clients.
Five banks that control nearly sixty percent of the industry dominate the mortgage industry: Wells Fargo (WFC), J.P. Morgan (JPM), U.S. Bancorp (USB), Bank of America (BAC), and CitiGroup (C). According to industry analysts, these companies are charging homeowners who choose to refinance up to 0.53 percent more than the market rate, although this is still sensible route for mortgage-holders because these rates are still much less than what many of them signed up for when the housing market was much stronger. This premium has netted banks as much as $12 billion during the HARP program, well more than double what homeowners have saved.
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While these regulations have proved to be a boon for mortgage providers of late, a backlash is beginning to emerge on Capital Hill and within the Obama Administration. Many in power would like to curb the benefits that these big financial institutions are receiving and it appears that it is more likely that HARP will soon be reformed.
We have compiled a list comprised of the major mortgage providers who could be adversely affected if the status quo is altered.
1. Wells Fargo & Company (WFC, Earnings, Analysts, Financials): Provides retail, commercial, and corporate banking services primarily in the United States. Market cap at $170.2B, most recent closing price at $32.03.
2. JPMorgan Chase & Co. (JPM, Earnings, Analysts, Financials): Provides various financial services worldwide. Market cap at $131.9B, most recent closing price at $34.65.
3. Citigroup, Inc. (C, Earnings, Analysts, Financials): Provides consumers, corporations, governments, and institutions with a range of financial products and services. Market cap at $81.84B, most recent closing price at $27.91.
4. U.S. Bancorp (USB, Earnings, Analysts, Financials): Provides various banking and financial services in the United States. Market cap at $58.74B, most recent closing price at $31.01.
5. Bank of America Corporation (BAC, Earnings, Analysts, Financials): Provides banking and financial services to individuals, small- and middle-market businesses, corporations, and governments primarily in the United States and internationally. Market cap at $82.55B, most recent closing price at $7.66.
(Written by Dan Connelly)
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