The government’s Home Affordable Refinance Program (HARP), first introduced in 2009, is a remarkable tool for helping credit unions reduce the risks and costs associated with the mortgage loans they currently service.
While there are many reasons for promoting HARP to your members, here are our top five:
HARP puts homeowners into a more secure financial situation, helping to lower credit unions’ overall servicing cost due to fewer delinquencies.
Homeowners who have refinanced under HARP also tend to perform better than do borrowers who are HARP eligible but do not refinance.
Refinancing under HARP can significantly reduce “rep and warrant” exposure that financial institutions are accountable for under the original loan.
Many key reps and warrants on the HARP loan will be extinguished after 12 months of on-time payments after delivery.
HARP originations are reported to have had a positive impact on many lenders’ income statements.
In April, the Federal Housing Finance Agency (FHFA) announced a two-year extension of HARP (now set to expire on December 31, 2015) and plans for a nationwide campaign to educate consumers about the program.
Homeowners may qualify for HARP even if they have little equity or owe more than their home is worth, were turned down in the past, have a low credit score or income, or don’t have money for closing costs. To qualify, the mortgage must be owned by Fannie Mae or Freddie Mac. A few other restrictions apply.
Making A Difference
Fannie Mae's own website features homeowner testimonials from borrowers who thought they couldn’t qualify and are now saving hundreds a month. The following is just one example.
Ruben, a former but now retired active-duty Air Force officer, and his wife bought their four-bedroom ranch-style home in Sacramento, California in 2007. Two years later, he was reassigned to the East Coast but unable to sell the home. He eventually found a renter, but between what he owned on the mortgage and what he was able to collect for rent he was losing about $1,000 a month.
Ruben endured the financial drain for almost four years before calling his mortgage company to ask about refinancing. The company wouldn’t qualify him because he was too far underwater. Fortunately, his next call was to a HARP lender. Within three weeks the loan was refinanced, dropping the interest rate nearly three percentage points for a savings of $763 a month. Ruben was so impressed with the lender and program he’s now refinancing his Virginia condo under HARP to save an additional $160 each month.
Reaching Your Membership
Fannie Mae suggests these best practices for your HARP outreach campaigns:
Use multiple solicitations and types of outreach (mail, phone calls, email, etc.)
Send mail solicitations via FedEx/UPS with a “call to action” deadline
Send a firm offer to refinance (i.e., pre-approval)
Include new rate and payment information
Follow up with a phone call or email
Offer no closing costs
Credit unions can build on this existing momentum by reaching out to their members using customizable HARP solicitation materials — including letters, postcards and statement inserts — available from Fannie Mae. These pieces can be customized to include your organization's logo and contact information, as well as the specific member’s loan information. Credit unions also have the option to use co-branded versions which includes both your logo/information and Fannie Mae’s.
Before using these materials, review the Guide for Using HARP Consumer Solicitation Materials for important instructions, terms and conditions, marketing tips, and more.
In addition to new solicitation materials, Fannie Mae recently updated the HARP section on its Know Your Options consumer website with a HARP eligibility “quiz.” This five-question quiz can be used by your loan officers or members to determine HARP eligibility.
A sample of customizable materials Fannie Mae makes available on its website.
With these abundant resources, and interest rates at or near historic lows, now is a great time to launch a HARP campaign. Help a borrower save several hundreds of dollars a month, and you’ll likely have an active member for a lifetime.
Robert Koller is a Director of Credit Risk Management for Fannie Mae’s Single Family Business.