BLOG VIEW: Remember the Home Affordable Refinance Program (HARP) heyday with a return on investment (ROI) of 18:1 and customers lining up at the door to refinance? Conditions that were too good to last and, of course, they didn't.
When the housing market started to rebound, HARP's golden days appeared to be on the wane, but HARP isn't fully maximized and was extended until December 2015 with additional benefits.
Today, there continue to be opportunities in the HARP market for both the homeowner and the lender – including how to market new mortgage products to previous HARP customers.
Despite the rosy housing numbers coming out of some parts of the country, more than 20% of homeowners remain underwater. Competition for these customers is fierce, yet HARP continues to convert at rates of more than 10%. When you consider the ROI for standard mortgage products is more in the neighborhood of 3:1 to 4:1, HARP continues to be one of the top three mortgage products.
HARP Was Extended
In March of 2012, the federal government took a step that dramatically broadened HARP eligibility. Loan-to-value (LTV) restrictions, previously capped at 125%, were dramatically increased. Now homeowners can be submerged in LTVs of several hundred percent or more and still qualify for HARP. Looking at risk versus ROI, what follows are key points as to why you want to market to this pool of the newly HARP-qualified:
- Excellent returns: For those with LTV ratios of over 125%, the return on marketing is double that of other borrowers.
- Eager customers: For fear of risk, fewer lenders are willing to jump into this market. Borrowers in this pool are going to be much more eager to do business with you.
- Same risk: Contrary to what many lenders think, these newly eligible homeowners do not actually default at a higher rate: Higher return but same risk.
- Eligibility safeguards: To qualify for HARP, consumers may not have had a late payment in the last six months. The government has added a built-in safety filter.
Marketing To Former HARP Consumers
So far, we've examined the new pool of high-LTV customers that now qualify for HARP. But don't forget, there is also a pool of former HARP customers who now qualify for private refinancing. Early on in the HARP program, some customers refinanced at rates that were high by HARP standards – nearly 5% in some cases. Rules prevented another HARP refinance, so borrowers were stuck. Now, rising home equity has allowed many of them to qualify for a non-HARP refinance – and at a lower rate.
Getting The Word Out
For both pools of homeowners – the newly HARP-eligible and the previous HARP borrower – education is the key to conversion. Many of these homeowners are unaware of the good news awaiting them. In the case of those with high LTV ratios, eligibility and qualifications requirements have changed, and previous HARP borrowers may have uncovered equity or may qualify for a lower rate from private refinancing.
So, by targeting your marketing to both of these groups, you can offer compelling solutions for new HARP prospects and previous HARP customers. This offers a win-win: higher conversions for you, and lower monthly payments for your customer.Â Â Â Â Â Â
Kesna Lawrence is the senior vice president for client strategy at Datamyx, a provider of data-driven technology solutions for direct marketing in the financial services, automotive and insurance industries. Prior to joining the Datamyx team in 2004, Lawrence held leadership positions at both ABN AMRO and Ocwen.