LAUREL, Md. (8/27/12)--Tower FCU in Laurel, Md., is helping members who are in trouble with their mortgages to refinance their homes at today's historically low interest rates--saving them thousands of dollars--through the federal government's Home Affordable Refinance Program (HARP).
It's a strategy that's paying off--for the members and for Tower, said the $2.37 billion asset credit union. To date, Tower has amassed more than $70 million in HARP applications, including those pending and ones that have closed.
"The intention of HARP was to help people who are current on their mortgage payments, but do not qualify for a traditional refinance due to a significant loss in their home's value, or who have little or no equity, to refinance and take advantage of lower interest rates," said Barry Stricklin, Tower's vice president of real estate lending. Borrowers may be eligible for HARP if their loan was sold to Fannie Mae or Freddie Mac before June 1, 2009.
Prior to the rollout of the second phase of HARP in March, Tower reached out to its members. "We wanted to take a proactive approach," said Martin Breland, Tower president/CEO. "We assumed many of our members were not aware of the new program and didn't know that they may qualify for a refinance even though their homes had lost value."
The results have been dramatic, Breland said. Since March, more than a quarter of Tower's mortgage refinance applications have been HARP loans.
Stricklin said the average monthly savings for those who refinanced through HARP is $425, or more than $5,000 annually. Some are homeowners on a fixed income. "Several members are saving over $700 per month, with one saving $979 a month--almost $12,000 per year. That's obviously life changing," he said.
While other lenders offer refinancing through HARP, Tower's program is different, Strickland noted. For instance, some lenders have self-imposed caps on loan-to-value and debt-to-income ratios, and others charge higher fees for HARP refinances than for conventional ones. Tower does neither. Many offer HARP only to people who already have a mortgage with them. Tower does not require that. The credit union also allows members with a home equity line of credit or home equity loan to refinance through HARP, if eligible.
To get the word out to members about HARP, Tower sent a series of mailings to those identified as good candidates for the program, based on when they closed their loan and house values in the areas where they live. The mailings included members who had mortgages with Tower and those with mortgages from other lenders.
Stricklin said he immediately knew they had struck a chord with members. "When the first mailing hit, our real estate lending department was inundated with calls," he said. "Some members who called didn't qualify for HARP, but were still able to refinance their homes with Tower at a lower rate using conventional programs.
"The major part of the current HARP is that there is no maximum cap on the loan-to-value requirement for refinancing, as was the case with the previous version," Stricklin added. "So even if a home has lost significant value due to the decline in the housing market, homeowners may still be able to refinance at a lower rate."
In many cases an appraisal is not required, Stricklin said.