Four years into the program and with two years left to go – providing there are no additional extensions – the Office of Inspector General (OIG) of the Federal Housing Finance Agency (FHFA) is gearing up for another marketing push to help educate and inform consumers about the merits of the Home Affordable Refinance Program (HARP).
In its ‘mid-point’ assessment of the program's performance to date, the OIG reiterated its March announcement that it will soon be embarking on a major ‘nationwide public relations campaign to educate borrowers about HARP,’ which was recently extended to run through 2015.
The campaign is specifically intended to address the borrower misconceptions that Fannie Mae identified in a borrower survey conducted earlier this year.
The FHFA reports that it has hired a public relations firm to coordinate and implement the campaign.
Launched in 2009 as a joint project of the FHFA and the Treasury Department, HARP was designed to assist borrowers with existing mortgages owned or guaranteed by government-sponsored enterprises (GSEs) Freddie Mac or Fannie Mae with refinancing, even if they had little or no equity, or were underwater.
The first iteration of the program, now called HARP 1.0, required borrowers to be current on their mortgage payments and to have a loan-to-value (LTV) ratio of 105% or less. Initially, it was anticipated that four to five million borrowers would take advantage of the program, but by September 2011, the participation rate was less than 1 million.
As a result, the FHFA, GSEs, lenders and other stakeholders identified several issues that were deterring homeowners from using the program, including the fact that loans with LTVs greater than 125% were not eligible for HARP 1.0 refinances and that the program's short duration (approximately 15 months) was discouraging lenders from participating.
After soliciting feedback from stakeholders, many of the problems with HARP 1.0 were addressed, compromises were made, and in October 2011, a re-branded program, ‘HARP 2.0,’ was launched. Changes included removing the 125% LTV ceiling and extending the duration of the program by 18 months.
As a result of these changes, interest in the program grew and refinancing volume increased dramatically. As of March 2013, 2.4 million HARP modifications had been completed.
Since that last round of changes, however, the OIG has identified additional barriers to HARP participation. A new round of modifications to the program has been proposed; however, the so-called ‘HARP 3.0’ program is yet to be approved and codified.
In its report, the OIG notes that although earlier barriers to participation have been substantially mitigated, there are still some issues remaining related to borrower knowledge and understanding of the program, including origination and closing fees, lender-placed mortgage insurance and lender capacity constraints.
The FHFA plans to launch the public relations campaign to address the remaining borrower ‘knowledge gaps’ and misconceptions regarding eligibility.
However, with two years left in the program, the OIG concedes that it will be ‘difficult to project how many HARP-eligible loans ultimately will be refinanced because, among other factors, educating borrowers and encouraging their participation continue to be major challenges.’
The report, which can be downloaded by clicking here, includes a detailed, chronological history of the HARP program, including its many challenges and triumphs.
To download the full report, click here.