2022-20898. Request for Information Regarding Mortgage Refinances and Forbearances

AGENCY:

Bureau of Consumer Financial Protection.

ACTION:

Request for information.

SUMMARY:

The Consumer Financial Protection Bureau (Bureau or CFPB) is seeking comment from the public about (1) ways to facilitate mortgage refinances for consumers who would benefit from refinancing, especially consumers with smaller loan balances; and (2) ways to reduce risks for consumers who experience disruptions in their financial situation that could interfere with their ability to remain current on their mortgage payments.

DATES:

Comments must be received by November 28, 2022.

ADDRESSES:

You may submit comments, identified by Docket No. CFPB-2022-0059, by any of the following methods:

• Electronic: Go to https://www.regulations.gov. Follow the instructions for submitting comments.

• Email: [e-mail]. Include Docket No. CFPB-2022-0059 in the subject line of the message.

• Mail/Hand Delivery/Courier: Comment Intake Mortgage Refinances and Forbearances RFI, Consumer Financial Protection Bureau, 1700 G Street NW, Washington, DC 20552.

Instructions: The Bureau encourages the early submission of comments. All submissions must include the document title and docket number. Please note the number of the topic on which you are commenting at the top of each response (you do not need to address all topics). Because paper mail in the Washington, DC area and at the Bureau may be subject to delay, commenters are encouraged to submit comments electronically. In general, all comments received will be posted without change to http://www.regulations.gov. In addition, comments will be available for public inspection and copying at 1700 G Street NW, Washington, DC 20552, on official business days between the hours of 10 a.m. and 5 p.m. eastern time. You can make an appointment to inspect the documents by telephoning 202-435-7275.

All comments, including attachments and other supporting materials, will become part of the public record and subject to public disclosure. Proprietary information or sensitive personal information, such as account numbers or Social Security numbers, or names of other individuals, should not be included. Comments will not be edited to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT:

Daniel Tingley, Counsel, or Mark Morelli, Ruth Van Veldhuizen, or Priscilla Walton-Fein, Senior Counsels, Office of Regulations, at 202-435-7700. If you require this document in an alternative electronic format, please contact [e-mail].

SUPPLEMENTARY INFORMATION:

I. Background

America's housing finance system provides important opportunities for consumers to access credit for housing and strengthen their financial standing. When broader macroeconomic forces result in declining interest rates, transparent and competitive markets should allow borrowers to benefit from lower rates, including through refinancing opportunities.^[1] These lower interest rates may allow borrowers to improve their financial condition by reducing their monthly payments, allowing borrowers to save more or pay down their mortgages more rapidly, making it easier for them to build wealth and equity. In addition, when that equity is threatened by temporary disruptions in the economy or in consumers' lives, products and policies that offer repayment flexibility may help mitigate those risks. In this Request for Information (RFI), the Bureau is seeking information about ways to help ensure that consumers have access to these opportunities. In particular, the Bureau is requesting information about (1) ways to facilitate residential mortgage loan refinances for borrowers who would benefit from refinances, especially borrowers with smaller loan balances; ^[2] and (2) ways to reduce risks for borrowers who experience disruptions that could interfere with their ability to remain current on their mortgage payments.

A. Facilitating Beneficial Refinances

Most borrowers seeking to lower their interest rate must refinance their mortgage. But recent research has shown that many consumers do not take advantage of falling market interest rates by refinancing. Some borrowers may find it challenging to determine whether they are likely to benefit from refinancing. In general, for refinancing to be beneficial for consumers, the costs of refinancing must be offset by the benefits of lower interest rates. While these benefits are greater for borrowers with large loan balances and those who stay in their homes longer, other borrowers may also benefit from refinancing to a lower interest rate. If these consumers do not refinance, they can experience adverse long-term financial consequences. In particular, they are likely to continue paying higher interest rates, leading them to accumulate less wealth over time and potentially face a higher risk of default than they would have if they had refinanced.^[3]

One particular area of concern is the availability of refinance opportunities for consumers with smaller loan balances. Larger mortgages make up a growing share of the mortgage market, with smaller mortgages comprising a steady or declining share.^[4] If the market provides limited opportunities for consumers to refinance smaller mortgages, Black and Hispanic consumers and consumers with low to moderate incomes would be disproportionately affected, as they are more likely to own homes with lower market values.^[5] These patterns may have contributed to the much lower rate of refinancing by Black and Hispanic consumers during recent periods of low interest rates.^[6] The Bureau is also concerned about the relative availability of refinance opportunities for consumers in rural areas, whose property might similarly have lower market values than in higher-priced geographic regions.

Several factors may help explain the differences in rates of refinancing. The large fixed costs of mortgage origination may limit the availability of mortgages for consumers with smaller loan balances, including beneficial refinances. The benefits of refinancing a smaller loan may be insufficient to offset the costs of refinancing. In addition, creditor capacity constraints and lower profitability on refinances of smaller loan balances may limit access to beneficial refinances for some borrowers. Research has shown that some—but not all—of the differences in refinancing rates across the population can be explained by common risk-based underwriting factors like credit scores and loan-to-value ratios.^[7] In addition, for consumers who primarily shop for credit in their local neighborhoods, a geographic concentration of higher cost lenders may lead to higher costs or reduced availability of refinancing options.^[8] Finally, researchers have noted more difficult-to-quantify potential barriers, including consumers' shopping behavior,^[9] trust of financial institutions,^[10] or the complexity and documentation involved in the refinancing process.^[11]

The Bureau is requesting information to better understand what barriers may prevent consumers from accessing falling interest rates and what interventions could lower those barriers, particularly for borrowers with smaller loan balances. Several potential policies and mortgage products are discussed below, and the Bureau requests information on the benefits and limitations of these ideas, as well as on alternative options to help consumers access lower interest rates.

1. Targeted and Streamlined Refinances

As described above, mortgage refinancing has the potential to provide important benefits to consumers through reductions in interest rates and monthly payments. During periods of falling interest rates, widely available refinancing allows homeowners to benefit from lower borrowing costs. In some circumstances, refinances can help borrowers at risk of delinquency and default. Targeted and “streamlined” refinance programs have been used to facilitate refinancing through reduced underwriting and documentation requirements, typically with lower transaction costs than traditional refinances. These programs, which may have specific eligibility requirements, are largely aimed at lowering interest rates and monthly payments for consumers who may otherwise be unlikely or unable to refinance.

Despite its potential benefits, refinancing also can pose risks to consumers. Serial refinancing ^[12] can be costly and reduce borrowers' equity in their property. Many targeted and streamlined refinance programs include protections against potential harms associated with refinances, such as requirements that the new loan reduce the consumer's monthly payment and interest rate by certain threshold amounts and seasoning requirements. Some programs either prohibit or limit cash-out payments from the refinance.

Targeted and streamlined refinance programs played a significant role in facilitating beneficial refinances during the period that followed the financial crisis, particularly for borrowers who were otherwise unable to refinance due to declines in their home value. During this period, the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA), and U.S. Department of Agriculture (USDA), which have historically offered streamlined refinance programs with reduced underwriting requirements, expanded their programs to facilitate refinancing for consumers at risk of delinquency and default.^[13] Similarly, after the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the GSEs) were placed into Federal conservatorship in late 2008, the Federal Housing Finance Agency (FHFA) created new refinance programs with the aim of mitigating foreclosures for consumers with existing GSE loans. FHFA announced the Home Affordable Refinance Program (HARP) in March 2009, which allowed consumers with high loan-to-value (LTV) ratios to refinance into lower interest rates with reduced documentation and underwriting requirements and relatively few eligibility criteria.^[14] HARP was expanded and renewed multiple times before expiring on December 31, 2018.^[15] FHFA and the GSEs implemented other high LTV refinance programs and provided some refinance options to borrowers with existing GSE loans who were not eligible for HARP.^[16] More recently, FHFA and the GSEs implemented targeted programs aimed at encouraging refinances for low- and moderate-income consumers, who have been less likely than higher-income consumers to take advantage of a low interest rate environment.

As part of the Bureau's monitoring of the mortgage market, some stakeholders suggested that changes to the Bureau's ability-to-repay/qualified mortgage rule (ATR-QM rule) could play a role in facilitating beneficial refinances through targeted and streamlined programs, citing the current rule as contributing to some existing frictions to refinancing. While refinances originated pursuant to Federal agency programs are not subject to the Bureau's ATR-QM rule,^[17] most other refinance transactions are subject to the rule.^[18] Under the ATR-QM rule, a creditor is prohibited from originating a covered mortgage without making a reasonable and good faith determination, based on verified and documented information, that the consumer will have a reasonable ability to repay the loan.^[19] To satisfy the ability-to-repay provisions of the rule, the creditor must, at a minimum, consider and verify eight underwriting factors, including the consumer's current or reasonably expected income or assets and current employment status. Loans that satisfy the requirements to be a QM are presumed to comply with the ability-to-repay requirement.^[20] The ATR-QM rule defines several categories of QMs, all of which require the creditor to consider and verify the consumer's income or assets relied on in making the loan.^[21]

Research has suggested that frictions in the refinance process, including potentially documentation requirements under the ATR-QM rule, may limit some refinancing opportunities that could benefit consumers. In the course of the Bureau's market monitoring, some stakeholders have asserted that it may be appropriate to address those frictions in some circumstances in which borrowers would receive a demonstrated benefit from refinancing, such as lower interest rates or lower monthly payments, and where other protections are in place, such as protections against serial refinances.

Consistent with the Bureau's overall goal of ensuring that consumers have access to the financial opportunities presented by the housing finance system, the Bureau is requesting information about whether and how the Bureau can facilitate beneficial refinances through targeted and streamlined refinance programs. The Bureau is also requesting information about whether and how the Bureau's existing rules, including the ATR-QM rule, could be amended to facilitate beneficial refinances while preserving important protections for consumers.

2. New Products To Facilitate Beneficial Refinances

Some creditors have introduced mortgage products designed generally to promote beneficial refinances by, for example, offering reduced closing costs for future refinances with that same creditor.^[22] Another potential option that could allow more consumers to take advantage of lower interest rates is through the introduction of other new mortgage products that would further facilitate refinances or allow more borrowers to obtain the benefits of lower interest rates without refinancing. Examples of these products include loans that would automatically trigger an offer to refinance or would reduce the loan's interest rate in certain circumstances, which might benefit homeowners by allowing them to make lower monthly payments or pay less total interest over the duration of the loan. The Bureau is seeking information about the risks and benefits if creditors were to develop and offer new mortgage products with these or similar features.

In particular, some researchers and stakeholders have proposed that creditors should offer an “auto-refi” mortgage.^[23] An “auto-refi” mortgage is a mortgage loan that provides for automatic or streamlined refinancing in the future when certain market conditions are met, with little or no affirmative action by the consumer. This product might decrease borrowing costs for consumers who would otherwise not refinance their loans for a variety of reasons, including the complexity of the refinancing process, documentation requirements, lack of knowledge or time, or creditor marketing practices. It might also simplify the refinancing process for consumers who anticipate mortgage interest rates are likely to decrease over the life of the loan. On the other hand, the Bureau notes that there may be impediments or risks associated with the auto-refi mortgage if consumers lack comfort with the concept or creditors find it difficult to price, competitively market, and sell these products on the secondary market. In addition, depending on how the product is structured, an auto-refi mortgage that repeatedly refinances might result in extended indebtedness for some borrowers.

An alternative product that might provide benefits similar to an auto-refi is a “one-way adjustable rate” mortgage (or one-way ARM). A one-way ARM loan, which involves only a rate change, not a refinancing, could have an adjustable interest rate that automatically decreases with market rates but never increases. A variation of this product could have an interest rate that automatically fluctuates with the market but never rises above its original rate. Like the auto-refi mortgage, a one-way ARM might allow more consumers to obtain the benefits of lower interest rates without undergoing the full, traditional refinancing process. Similarly, however, this product might be difficult for consumers to understand or challenging for creditors to competitively market, price, and sell on the secondary market.

B. Forbearances and Other Loss Mitigation

In the early months of the COVID-19 pandemic, economic activity contracted, and millions of workers lost their jobs. In response, Congress passed, and the President signed into law, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).^[24] One key provision of the CARES Act required servicers of federally backed mortgages to grant a borrower's request for up to 180 days of forbearance if the consumer attested to a COVID-19-related financial hardship, with the option to extend the forbearance period for an additional 180 days at the request of the borrower. Guidance from Fannie Mae and Freddie Mac, the FHA, the VA, and the USDA extended the length of their COVID-19 forbearance programs an additional six months for a maximum forbearance period of 18 months.^[25] Privately owned mortgages were not covered by the CARES Act, but many servicers and investors offered similar forbearance programs for those borrowers.

These forbearance programs are an example of streamlined short-term loss mitigation solutions that have helped maintain the stability of the mortgage market during the pandemic, providing benefits to consumers, as well as investors. Over the course of the pandemic, 8.2 million borrowers have entered a forbearance program, and as of July 2022, 93 percent have exited.^[26] Most forbearance exits have been successful—52 percent of consumers who took forbearance have resumed making regular mortgage payments and 32 percent have paid off their mortgage in full. As of July 2022, just 4 percent are delinquent on their mortgage and 1 percent are in active foreclosure.^[27] Of the post-forbearance consumers who are in active foreclosure, about 65 percent were behind on their mortgage payments going into the pandemic.^[28] As of July 2022, mortgage delinquency and foreclosure levels were below pre-pandemic levels.^[29]

Given the apparent overall success of forbearance programs and other streamlined loss mitigation solutions in connection with the COVID-19 pandemic, the Bureau is requesting comment on the actions it or others can take or should consider taking to spur automatic and streamlined short and long-term loss mitigation offers for borrowers with mortgages impacted by temporary financial hardship more generally ( i.e., not just as a result of the financial impacts of the pandemic). The Bureau is particularly interested in receiving information about what features of these COVID-era short and long-term loss mitigation programs should be made more generally available to borrowers, and in particular, if there are ways to automate and streamline the offering of short and long-term loss mitigation solutions. The Bureau is interested in ensuring that homeowners who are economically affected by events such as natural disasters are able to receive timely payment relief that could help them avoid foreclosure.

II. Request for Comment

This request seeks information from the public on: (1) ways to facilitate refinances for consumers that would benefit from refinances, especially consumers with smaller loan balances; and (2) ways to reduce risks for consumers that experience disruptions that could interfere with their ability to remain current on their mortgage payments. The CFPB welcomes comments from consumers, creditors, and other stakeholders, including the submission of descriptive information about experiences of people participating in the mortgage market, as well as research and other evidence. Commenters need not answer all or any of the specific questions posed. These questions are not meant to be exhaustive; the Bureau welcomes additional relevant comments on these important topics. For answers to specific questions, please note the number associated with any question to which you are responding at the top of each response.

Barriers to Refinancing

1. What barriers may prevent consumers from accessing falling interest rates through refinancing and what solutions could lower those barriers, particularly for consumers with smaller loan balances? Are there particular issues in obtaining refinances or would any particular approaches be more effective for certain types of homeowners, such as servicemembers, older adults, and first-time homeowners?

2. To what extent do large fixed costs of refinancing and limited profitability for smaller loan balances limit beneficial refinances? What potential policies could lower costs for beneficial refinances?

3. How much do common risk-based underwriting factors like credit scores and loan-to-value ratios account for the differences in refinancing rates across the population?

4. To what extent do the types of creditors offering refinance products in particular geographic areas affect refinancing rates in some areas and for some consumers?

5. To what extent are refinancing rates affected by potential barriers that may be more difficult to quantify, including borrowers' shopping behavior, trust of financial institutions, or the complexity and documentation involved in the refinancing process?

6. To what extent do consumers in rural areas face limited opportunities for refinances and what are the factors, including smaller loan balances, that may limit refinance opportunities for those consumers?

Targeted and Streamlined Refinances

1. How can the Bureau support industry efforts to facilitate beneficial refinances through targeted and streamlined refinance programs?

2. What are the current barriers to widespread use or promotion of existing refinance programs and, relatedly, what features of refinance programs are important to promoting widespread use?

3. What protections should be included in refinance programs to ensure consumer benefit, such as requirements for a lower interest rate and monthly payments, loan term limits, limits on serial refinancing, and requirements to refinance the consumer into a more stable mortgage product?

4. Should the Bureau's rules, including the ATR-QM rule, be amended to encourage beneficial refinances while preserving important protections for consumers? If so, how? What are the risks and benefits of doing so?

5. What are the risks and benefits of removing or modifying the current ATR-QM requirement that a creditor must consider and verify a consumer's income or assets relied on in making the loan in the context of a refinance program?

Potential New Products To Facilitate Refinances

1. What products or programs have lenders introduced to attempt to facilitate refinances for borrowers who would benefit from refinancing? What are the advantages and disadvantages of these products and programs?

2. What are the potential benefits and drawbacks of auto-refi mortgages and one-way ARMs?

3. Could creditors feasibly market and price auto-refi mortgages and one-way ARMs?

4. How could creditors most effectively structure auto-refi mortgages?

5. How could creditors most effectively structure one-way ARMs?

6. How could these products be designed to minimize risks to consumers?

7. Under what market conditions should an auto-refi mortgage automatically refinance? ^[30]

8. Under what market conditions should the rate of a one-way ARM change?

9. Should these conditions be regulated or left to market forces?

10. Do any market factors or practical difficulties, including secondary market liquidity and mortgage-backed securities (MBS) investor interest, preclude the development of auto-refi mortgages or one-way ARMs? How would these or similar products impact the MBS market?

11. Should the Bureau amend the ATR-QM rule or other regulations to permit or encourage creditors to offer auto-refi mortgages or one-way ARMs? If so, how?

12. Are there any other new products that creditors could feasibly develop that would allow more borrowers to receive the benefits of reduced mortgage interest rates?

13. Would these products be prohibited or discouraged by existing regulations promulgated by the Bureau?

14. Should the Bureau (or other Federal regulators) amend regulations to permit or encourage the development of these products?

15. Are there other legal impediments or policies that may deter the introduction of auto-refi mortgages, one-way ARMs, or other new products that could facilitate beneficial refinances?

Forbearances and Other Loss Mitigation

1. What are the benefits and drawbacks of automating and streamlining short and long-term loss mitigation offers?

2. If such automation and streamlining of loss mitigation offers is incorporated within new mortgage products:

a. How should such products be structured?

b. How and where should such features be established ( e.g., the note, contracts between investors and servicers, or regulations created or amended by the Bureau or other Federal regulators)?

3. Under what circumstances should short or long term loss mitigation solutions be offered automatically? For example, should forbearance be offered automatically upon the declaration of a national emergency or presidentially declared disaster, when unemployment rates in the consumer's locality reach a certain level, when a borrower loses their job, when a co-borrower on the loan dies, or under other circumstances? What factors should be considered regarding these circumstances? Should any documentation from the consumer be required in any of these circumstances?

4. For short-term loss mitigation solutions, such as forbearance, to what extent is there tension between the goal of offering meaningful immediate payment relief and the goal of ensuring that the balance owed does not grow so large as to make long-term loss mitigation solutions difficult to achieve? Should there be a maximum length of a short-term loss mitigation solution and, if so, what is the appropriate maximum length?

5. What impact would the Bureau's mortgage servicing regulations, such as those relating to communications with delinquent borrowers, the Bureau's regulatory definition of delinquency, and the loss mitigation process in general, have on automating and streamlining short and long-term loss mitigation offers?

6. What changes, if any, should be considered relating to the impact that forbearances and other short-term loss mitigation solutions would have on a consumer's credit reporting?

7. Should standards be set to ensure affordability of long-term loss mitigation solutions? If so, what features of a long-term loss mitigation solution would best help ensure long-term affordability? For example, would term extension, limits on monthly payment increases, or principal forgiveness assist with the goal of long-term affordability?

8. When considering the potential automation and streamlining of short and long-term loss mitigation offers, would there be advantages or drawbacks if more creditors retained servicing of the mortgage loans they originate? Do payment relief advantages exist when an original creditor retains servicing of a mortgage loan? If so, should the Bureau consider ways to encourage originators to retain the servicing of mortgage loans?

9. When considering the potential automation and streamlining of short and long-term loss mitigation offers, are there particular issues or would any particular approaches be more effective for certain types of homeowners, such as servicemembers, older adults, and first-time homeowners?

10. Other than the mortgage products already mentioned in this RFI, are there other mortgage products or features of mortgage products that could help borrowers weather various financial shocks? What are the advantages or drawbacks of these mortgage products or features of mortgage products?

11. Are there other options not mentioned in this RFI that could help achieve the goal of reducing risk for homeowners who are facing financial hardship? If so, what are those options?

Rohit Chopra,

Director, Consumer Financial Protection Bureau.

Footnotes

1.  Although mortgage interest rates are higher than they were one year ago, they have fluctuated in recent months and remain sensitive to monetary policy changes and market forces. See https://www.freddiemac.com/​pmms (last visited Sept. 15, 2022). Accordingly, even with higher current interest rates, short-term fluctuations or market developments may provide some consumers with opportunities to refinance.

2.  Smaller loan balances are generally defined as balances substantially lower than the national average. Policymakers and researchers have used a range of specific dollar thresholds for defining smaller loan balances, including mortgages below $114,847 (current General QM threshold), below $150,000 (Kenneth P. Brevoort, Do Low Mortgage Balances Limit Refinancing Opportunities? (July 14, 2022), https://papers.ssrn.com/​sol3/​papers.cfm?​abstract_​id=​4163151, Pew Charitable Trusts Home Fin. Project, https://www.pewtrusts.org/​en/​projects/​home-financing (last visited Sept. 15, 2022)), or below $70,000 (Bing Bai et al., Small-Dollar Mortgages for Single-Family Residential Properties, Policy Discussion Paper Series 93558, Fed. Reserve Bank of Chic. (2018), https://ideas.repec.org/​p/​fip/​fedhpd/​93558.html). See Bureau of Consumer Fin. Prot., Truth in Lending (Regulation Z) Annual Threshold Adjustments (Credit Cards, HOEPA, and Qualified Mortgages) (Nov. 2, 2021) https://www.consumerfinance.gov/​rules-policy/​final-rules/​truth-lending-regulation-z-annual-threshold-adjustments-card-act-hoepa/​; Brevoort, supra; Pew Charitable Trusts Home Fin. Project, supra; Bai et al., supra.

3.  Several studies have leveraged policy-induced variation in the availability of refinances to estimate causal declines in mortgage default for borrowers who refinance. See Joshua Abel & Andreas Fuster (2021), How Do Mortgage Refinances Affect Debt, Default, and Spending? Evidence from HARP, Am. Econ. Journal: Macroeconomics, https://www.aeaweb.org/​articles?​id=​10.1257/​mac.20180116;​ Kadiri Karamon, Douglas McManus & Jun Zhu (2017), Refinance and Mortgage Default: A Regression Discontinuity Analysis of HARP's Impact on Default Rates, Journal of Real Estate Fin. & Econ., https://ideas.repec.org/​a/​kap/​jrefec/​v55y2017i4d10.1007_​s11146-016-9566-z.html.

4.  Bai et al., supra.

5.   Id.

6.  Kristopher Gerardi, Laurie Lambie-Hanson & Paul Willen (2021), Racial Differences in Mortgage Refinancing, Distress, and Housing Wealth Accumulation during COVID-19, Fed. Reserve Bank of Boston Current Policy Perspectives, https://www.bostonfed.org/​publications/​current-policy-perspectives/​2021/​racial-differences-in-mortgage-refinancing-distress-and-housing-wealth-accumulation-during-covid-19.aspx.

7.  Kristopher Gerardi, Paul Willen & David Hao Zhang (2020), Mortgage Prepayment, Race, and Monetary Policy, Fed. Reserve Bank of Atl. Working Paper Series, https://www.bostonfed.org/​publications/​research-department-working-paper/​2020/​mortgage-prepayment-race-and-monetary-policy.aspx (Gerardi et al.).

8.  Gerardi et al., supra, find a role for neighborhood in disparities, but Bhutta & Hizmo (2021) find no price disparities within creditor: Combining these two findings suggests that the composition of creditors serving different neighborhoods may play a role. Frame, Huang, Mayer & Sunderam (2022) also find that minority underrepresentation among mortgage loan officers has adverse effects on credit access for minority consumers. See Neil Bhutta & Aurel Hizmo, Do Minorities Pay More for Mortgages?, Review of Fin. Studies, Vol. 34, Issue 2 (Feb. 2021), https://doi.org/​10.1093/​rfs/​hhaa047; and W. Scott Frame, Ruidi Huang, Erik J. Mayer & Adi Sunderam (2022), The Impact of Minority Representation at Mortgage Lenders, NBER Working Paper No. 30125, https://www.nber.org/​papers/​w30125.

9.  Alexei Alexandrov & Sergei Koulayev (2017), No Shopping in the U.S. Mortgage Market: Direct and Strategic Effects of Providing Information, Consumer Fin. Prot. Bureau Office of Research Working Paper No. 2017-01, https://papers.ssrn.com/​sol3/​papers.cfm?​abstract_​id=​2948491;​ Neil Bhutta, Andreas Fuster & Aurel Hizmo (2020), Paying Too Much? Price Dispersion in the U.S. Mortgage Market, FEDS Working Paper, Bd. of Governors of the Fed. Reserve Sys., https://www.federalreserve.gov/​econres/​feds/​paying-too-much-price-dispersion-in-the-us-mortgage-market.htm.

10.  Eric J. Johnson, Stephan Meier & Olivier Toubia (Feb. 2019), What's the Catch? Suspicion of Bank Motives and Sluggish Refinancing, Rev. of Fin. Studies, Vol. 32, Issue 2, https://doi.org/​10.1093/​rfs/​hhy061.

11.  Anthony A. DeFusco & John Mondragon (2020), No Job, No Money, No Refi: Frictions to Refinancing in a Recession, Journal of Fin., https://onlinelibrary.wiley.com/​doi/​10.1111/​jofi.12952; Thomas Piskorski & Amit Seru (2018), Mortgage Market Design: Lessons from the Great Recession, Brookings Papers on Econ. Activity, https://www.brookings.edu/​wp-content/​uploads/​2018/​03/​PiskorskiSeru_​Text.pdf.

12.  Serial refinancing is used herein to mean repeat refinances over a short period of time. In some cases, serial refinancing, which was a common practice in the period leading up to the 2008 financial crisis, is the result of lenders engaging in loan churning to extract fees from a consumer.

13.  For a discussion of these programs, see 78 FR 35430, 35436 (June 12, 2013).

14.   See Press Release, U.S. Dep't of Treas., Relief for Responsible Homeowners (Mar. 4, 2009), http://www.treasury.gov/​press-center/​press-releases/​Pages/​200934145912322.aspx.

15.   See Press Release, Fed. Hous. Fin. Agency (Aug. 17, 2017), https://www.fhfa.gov/​Media/​PublicAffairs/​Pages/​FHFA-Announces-Modifications-to-High-LTV-Streamlined-Refi-Program-and-Extension-of-HARP-Thru-12-2018.aspx. The HARP program was originally set to expire in June 2010 and was limited to consumers with an LTV ratio that did not exceed 105 percent. However, HARP was modified over time and the GSEs and FHFA eventually removed the LTV ratio cap, facilitating refinances for all underwater consumers who otherwise fit HARP's criteria. See Fed. Hous. Fin. Agency Refinance Report (June 2012).

16.  For example, Fannie Mae's Refi Plus program and Freddie Mac's Relief Refinance program provided streamline refinancing opportunities to consumers with LTV ratios of less than 80 percent.

17.  TILA section 129C(a)(5) gave authority to FHA, VA, and USDA to exempt from the income verification requirement of the ATR-QM rule certain streamlined refinances made, guaranteed, or insured by those agencies if certain conditions are met. In addition, TILA section 129C(b)(3)(B)(ii) requires those Federal agencies to prescribe rules related to the definition of qualified mortgage (QM) for their loan programs. Those agencies have defined categories of loans made pursuant to streamlined refinance programs that are QMs and therefore presumed to comply with the ability to repay requirement. See78 FR 75215 (Dec. 11, 2013) (providing the QM definition for FHA loans); 79 FR 26620 (May 9, 2014) (providing the ability to repay standards and QM definition for VA loans); 81 FR 26461 (May 3, 2016) (providing the QM definition for RHS loans).

18.  12 CFR 1026.43(a) and comment 43(a)-1. Regulation Z provides a special rule for creditors refinancing a non-standard mortgage—defined as an adjustable-rate mortgage with an introductory fixed interest rate for a period of one year or longer, an interest-only loan, or a negative amortization loan—into a standard mortgage. Under this option, a creditor refinancing a non-standard mortgage into a standard mortgage does not have to consider the specific underwriting criteria required by the ATR-QM rule, if certain conditions are met. These conditions include a requirement that the monthly payment for the standard mortgage be “materially lower” than the monthly payment for the non-standard mortgage and payment history requirements. This option is available only for refinances where the creditor for the standard mortgage is the current holder or servicer of the non-standard mortgage. 12 CFR 1026.43(d).

19.  12 CFR 1026.43(c).

20.  12 CFR 1026.43(e).

21.  Until recently, loans made pursuant to GSE refinance programs were generally eligible for QM status under the Temporary GSE QM loan definition. Under that definition, loans were presumed to comply with the ATR-QM rule as long as the loans (1) met the rule's prohibitions on certain loan features and limits points and fees; and (2) were eligible to be purchased or guaranteed by the GSEs while under FHFA conservatorship. Under this definition, GSE-backed refinances could obtain QM status even if the loan did not meet the requirements applicable under other QM definitions (for example, verification of income and employment). In 2013, the Bureau proposed to temporarily exempt from the ATR-QM rule certain streamlined refinances made pursuant to GSE refinance programs because of concerns that the ATR requirements could restrict credit access for consumers seeking to refinance through HARP and other GSE programs aimed at assisting at-risk consumers. See78 FR 6621, 6650-51 (Jan. 30, 2013). However, the Bureau later withdrew that proposal. In withdrawing the proposal, the Bureau noted that loans that would have been eligible for the proposed exemption were eligible for QM status under the Temporary GSE QM loan definition, which the Bureau determined struck the appropriate balance between preserving consumers' rights to seek redress for violations of TILA and ensuring access to responsible, affordable credit. See78 FR 35430, 35473-74 (June 12, 2013).

22.   See, e.g., Brandon Ivey, Lenders Getting Innovative as Refi Business Dwindles, Inside Mortg. Fin. (Aug. 4, 2022), https://www.insidemortgagefinance.com/​articles/​225298-lenders-getting-innovative-as-refi-business-dwindles.

23.   See, e.g., Kanav Bhagat, Extending the Benefits of Mortgage Refinancing: The Case for the Auto-Refi Mortgage (Oct. 6, 2021), https://papers.ssrn.com/​sol3/​papers.cfm?​abstract_​id=​3927174.

24.  Public Law 116-136, 134 Stat. 281 (2020).

25.   See, e.g., Fed. Hous. Fin. Agency, FHFA Extends COVID-19 Forbearance Period and Foreclosure and REO Eviction Moratoriums (Feb. 25, 2021), https://www.fhfa.gov/​Media/​PublicAffairs/​Pages/​FHFA-Extends-COVID-19-Forbearance-Period-and-Foreclosure-and-REO-Eviction-Moratoriums.aspx; Press Release, The White House, Fact Sheet: Biden Administration Announces Extension of COVID-19 Forbearance and Foreclosure Protections for Homeowners (Feb. 16, 2021), https://www.whitehouse.gov/​briefing-room/​statements-releases/​2021/​02/​16/​fact-sheet-biden-administration-announces-extension-of-covid-19-forbearance-and-foreclosure-protections-for-homeowners/​. Insurers and guarantors of mortgages typically provide detailed servicing guidelines, including guidelines related to loss mitigation, that servicers must follow.

26.  Black Knight Mortg. Monitor, July 2022 Report at 24 (July 2022), https://www.blackknightinc.com/​wp-content/​uploads/​2022/​09/​BKI_​MM_​July2022_​Report.pdf (Black Knight July 2022 Report).

27.   Id.

28.  Black Knight Mortg. Monitor, April 2022 Report at 7 (Apr. 2022), https://www.blackknightinc.com/​wp-content/​uploads/​2022/​06/​BKI_​MM_​Apr2022_​Report.pdf.

29.  Black Knight July 2022 Report at 4.

30.  For example, one researcher's proposed auto-refi mortgage product would automatically refinance when a 0.50 percent interest rate reduction and 7.5 percent payment reduction can be achieved. See Bhagat, supra, at 14.