The federal government's Home Affordable Refinance Program is providing at least one credit union with an avenue to make new mortgage loans.
The 126,000-member Tower Federal Credit Union in Laurel, Md., has handled $70 million in HARP loan applications since March, 70% of them coming from members who had loans with other lenders.
“The intention of HARP was to help people who are current on their mortgage payments but do not qualify for a traditional refinance – due to a significant loss in their home’s value or who have little or no equity – to refinance and take advantage of lower interest rates,” said Barry Stricklin, Tower’s vice president of real estate lending.
Borrowers may be eligible for HARP if their loan was sold to Fannie Mae or Freddie Mac before June 1, 2009.
Stricklin explained that the $2.5 billion credit union felt particularly proud of its effort with the latest version of HARP, dubbed HARP 2.0, because the first HARP program had been so poorly designed it had not helped many borrowers.
Under the rules of the first HARP program, a credit union would submit loan information for underwriting by Fannie Mae and, only if it passed that first hurdle, could it be refinanced.
In addition, the first HARP program's loan-to-value parameters for eligible loans were so narrowly drawn they effectively left too many borrowers out, Stricklin explained.
Unlike that program, however, HARP 2.0 eliminated the loan-to-value rules entirely and significantly relaxed Fannie Mae's underwriting rules, Stricklin said, often to the point where a borrower whose loan had been rejected for a HARP refinance a few months before could now be resubmitted and found to qualify.
“Often it was like night and day,” Stricklin said. “It was that dramatic.”
But as good as it was for borrowers, Stricklin explained that the changed program left the CU with a challenge.
Tower was afraid so many other members had heard that HARP could not help them or had even tried to apply under the first program and failed, that they would not understand that the HARP 2.0 was a significantly different program.
“By keeping the same name, we were worried that some members might miss the opportunity to apply,” Stricklin said.
So Tower began a detailed analysis of its member's loan histories, identifying those which had the sorts of mortgage loans which would likely qualify based on what the credit union knew about surrounding real estate values, and then sending letters to those members.
“We didn't tell members to apply,” Stricklin said. “All we did was explain the new HARP program and then invite them to call us and see if they might qualify.”
Tower also didn't restrict the effort to only members with loans they originated with the credit union, Stricklin recounted. Members with loans they had received from another institution got the same letter, only with an additional sentence advising the members that even though they had gotten their loans from somewhere else, the credit union was still able to help them.
The results have been outstanding, Stricklin reported, with many members relating how they tried to get a HARP refinance from other institutions only to face additional fees and loan-to-value caps (even though HARP 2.0 does not set any) and long delays as the larger banks tried to cope with the strong volume.
“In the end we decided why not try to recapture some of that business,” Stricklin said, adding that the credit union saw the opportunity to help its members refinance their loans as a chance to both originate more mortgage loans as well as positively impact the lives of its members.