By. Dan Green, EVP, Marketing, Mortgage Cadence
The housing market is in recovery; most economists and many of us involved in the industry agree. Low rates are, perhaps, the biggest contributing factor. And they are low. Lowest in history? Pretty close. While doing some research recently, we came across the 140-year history of the 10 year treasury rate. Looks like rates were this low just once during this period, in 1940. Based on the data, it’s safe to say rates really are the lowest in history.
But you knew that. What you might not have known is we – lenders – are having a hard time getting a certain group of homeowners to avail themselves of this once in a lifetime opportunity. Who are they? Why won’t they refinance? Great questions.
First, who they are. According to an article last week on Fortune’s Term Sheet blog, this subset of homeowners dwell in the larger set known as those underwater: those who owe more on their homes than their homes are worth. Plenty has been written about them. Even more has been done to help them. The Home Affordable Refinance Program, HARP, was created in 2009 and revamped in 2011 to save them hundreds of dollars per month, thousands per year. Yet, according to last week’s article, only about 25% of HARP-eligible borrowers end up refinancing.
That leads us to why. One potential answer, perhaps the answer, is such a deal seems too good to be true. Some, maybe many of these homeowners bought their homes using loans that were too good to be true. Once bitten, they are now overly cautious about a deal that will save them money and keep them in their homes. And that’s too bad. HARP may be one of the best programs to come out of the housing crisis. Those who have used it are saving thousands of dollars per year. More importantly, they have stayed in their homes and in their communities, both of which contribute positively to overall economic recovery.
What do we do? This is where credit unions have an advantage. As the trusted financial advisor to many members, we’re in an ideal position to help those HARP-eligible borrowers who are sitting on the sidelines and will miss out if they do not act this year. Active HARP-lending credit unions have told me the usual methods are not working: email, snail mail, call center outreach. Perhaps it is time to enlist the help of those members who have taken advantage of the Program: personal testimonials from members who have refinanced, talking about their experience and the impact it has had on their lives. eNewsletters are one delivery method. Social media may be another, better answer.
HARP, at least at the moment, officially ends on December 31, 2013. Somewhere in the wide range of 2 million to 7 million homeowners remain eligible. Don’t let them miss this chance.