Harps are not just for angels, they are for credit unions too
The latest incarnation of government efforts to help distressed and underwater homeowners is known as HARP 2.0 â the Home Affordable Refinance Program. The original program was not as successful as intended for a variety of reasons. The law of unintended consequences worked perfectly here â many homeowners who were making payments in good faith on underwater mortgages were frozen out of the low rate environment, and left unable to refinance their mortgages because of a high loan-to-value ratio.
As Fannie Mae puts it, âThe primary expectation for Home Affordable Refinance is that refinancing will put responsible borrowers in a better position by reducing their monthly principal and interest payments, reducing their interest rate, reducing their amortization period, or moving them from a more risky loan structure (such as an interest-only mortgage or a short-term ARM) to a more stable product (such as a fixed rate mortgage)."
There are also provisions for fee reductions and helping credit unions address the risk of HARP 2.0 refinancing -- you can read more about the program from Fannie Mae.
Bottom line â best estimates are that more than one million homeowners will participate, with an average loan balance of $150,000 to $175,000.
So what does this mean for credit unions? Certainly, take a look at HARP 2.0 if you have members that meet the criteria that you have not already been able to help, to see if there might be some opportunities for you to assist.
But you should also look at HARP 2.0 as a golden opportunity to gain market share, because there will be many homeowners in your local market that will be viable candidates for refinancing with your credit union. Finding and meeting the needs of these prospective members offers a viable, profitable growth strategy in the mortgage space.
This is a complicated area, so let me suggest two additional resources on this topic â first, we recently did a podcast with an expert on this topic â Dan Green, EVP/COO of Prime Alliance, our Preferred Partner for mortgage solutions for credit unions. Dan explains in great detail how credit unions can and should leverage this opportunity. The podcast is available at www.nafcu.org/primealliance.
The second is an opportunity coming up at the NAFCU Strategic Growth Conference, March 13-15 in Scottsdale, AZ â Dan will be speaking, along with other experts, offering best practices on how credit unions across the country are growing their mortgage lending programs.
Post written by Dave Frankil, President, NAFCU Services Corp.
