Lately there has been a lot of buzz around HARP 2, a restructure of Obama administration’s Home Affordable Refinance Program introduced in 2009 to help underwater homeowners with loans backed by Fannie and Freddie scheduled to roll out December 1. The version 1.0 results were underwhelming mainly due to the requirement limiting CLTV to below 125, among other restrictions. HARP 2.0 has many improved features such as a higher CLTV limit, lower origination fees and a couple of different loan term options which should benefit a lot more underwater home owners compared to HARP 1.0. In fact the benefits to the borrowers are clear and quantifiable. What is not so clear is the benefit to the servicer, which in my mind, may be the biggest stumbling block to success this time around.

For servicers, the primary incentive seems to be the waiver of lender liability – that they will not be on the hook for reps and warrants of the original loan if they successfully refinance the loan under this program. No doubt this is very appealing, but the benefits are very hard to quantify especially since the borrowers who qualify represent limited risk for buyback in the first place, since they must be current with no lates in the last 6 months with loans originated prior to June 2009 – essentially somewhat seasoned and performing loans. Consequently, it is hard to imagine servicers willing to hire more bodies to field a potential flood of phone calls and manage additional paperwork on top of all the short sales, foreclosures, and REOs that they are already struggling to work through. In fact, judging from the response from some of the servicers at the AmeriCatalyst Conference I attended in Austin, TX recently, my suspicion may be justified. Although official start date is December 1, based on the voluntary nature of the program, many servicers will be slow to initiate solicitation.

But contrary to the response from the larger servicers, we are receiving inquiries regarding identifying HARP 2 qualified borrowers from banks looking to grow their servicing portfolio and looking to acquire new deposit customers for cross-sell opportunities. In fact, we have already identified potential HARP 2 qualified borrowers from our nationwide database and are in talks with credit bureaus to potentially further enhance the list with respect to payment status. All in all, for some servicers HARP 2 may prove to be a very cost effective and profitable strategy for growing their customer base.