Some homeowners are getting stuck with relatively high interest rates even after they participate in the government's program to help them refinance their mortgages. The biggest banks are not lowering rates as much as they could be — and homeowners have few options to go elsewhere.

Analysts say that the big banks are set to make major profits off of the Home Affordable Refinancing Program, also known as HARP, which allows homeowners with loans backed by government-owned Fannie Mae and Freddie Mac to refinance if they owe more than their home is worth.

The program, launched in 2009, is designed to let struggling borrowers take advantage of lower market interest rates. So far, about 1.1 million people have refinanced under the program, which was expanded last fall to make it more attractive for banks and to let more homeowners participate.

Since then, the government says there has been "tremendous borrower interest" and estimates that another 1 million could qualify over the next two years. But while the expansion may let more people refinance, it may not be at the lowest rate possible because the incentives don't favor competition, according to a new report by an investment group Amherst Securities.

The report says the big banks are able to make a considerable profit from refinancing their existing customers under HARP, and that there is little incentive for them to go outside their own customer base and seek out more HARP business on mortgages that originated with other lenders.

Few other companies have stepped in to offer HARP refinancing for people who'd like to leave their current lender, partly because it is still risky for them to take on the underwater loans, even with the HARP incentives.

The result is that homeowners in many cases are stuck with what they've got, Amherst says, and the big banks can charge them more.

Guy Cecala, who runs the publication Inside Mortgage Finance, said that there is "virtually no competition" for the big banks. "It's normal business practice for mortgage lenders — when you can, you charge a higher interest rate."

Here's how this situation came about.

For Banks, Built-In Incentives

Last fall's expansion of HARP tries to make it more appealing to mortgage lenders, since the initial response to the program fell short of expectations.

New rules removed the cap on how much a borrower could be underwater and still qualify. It also eased appraisal requirements and — critically for banks — removed some of the liability for bad loans that banks had when selling their mortgages to Fannie and Freddie.

The Amherst report points out that the biggest lenders — JP Morgan Chase, Bank of America, and Wells Fargo — are responsible for more than 60 percent of HARP refinancing applications. The report also says the cost of refinancing an existing customer under HARP is minimal.

The big banks already have plenty of demand in-house. As such, it's easier and more profitable to stick with the loans they already service than to compete for new business, which could result in lower rates for homeowners.

The report says that the extra steps required under HARP to refinance a loan from another lender make the process onerous and risky. A spokeswoman for the Federal Housing Finance Agency (FHFA), which is in charge of HARP, disputed the notion that it's difficult to sign up new borrowers. "The additional information collected is minimal and appropriate, given that these lenders have no experience with or information on these (new) borrowers," she said.

JP Morgan Chase, Wells Fargo and Bank of America all confirmed to ProPublica that they have seen an increase in the volume of applications for HARP refinancing since the new rules came into effect. Last month, American Banker reported that banks were scrambling to bolster their mortgage-servicing units to deal with the influx of applications from HARP.

The program is voluntary for banks, and they can place their own restrictions over and above those set by the government.

JP Morgan Chase and Bank of America say they are only doing HARP refinancing for existing customers — not seeking out new business on loans originated by other lenders. Wells Fargo is accepting refinance applications from borrowers at other servicers, but it is putting a cap on the amount that the loan can be underwater.

Update (4/6): A spokesman for Bank of America said in an email sent after this story published that the bank’s goal is "to provide fair prices for HARP."

In January, according to the FHFA, roughly 50,000 people refinanced under the new HARP rules, and HARP's share of all refinancing increased. Some smaller lenders, especially in states with the worst housing markets, are hoping to jump in and offer lower rates to people looking to leave their current bank, even with the greater risk.