Nearly 50% of banks are not participating in the HARP 2.0 program and only 30% are actively soliciting applications, according to a Federal Reserve Board survey released Monday afternoon.
The survey of senior loan officers at 53 banks found that only 16 banks, mostly large banks, are actively soliciting HARP 2.0 applications.
Another 12, or 22% of the respondent banks, said they are “satisfying” requests for HARP 2.0 refinancings of high LTV loans guaranteed by Fannie Mae and Freddie Mac, but not soliciting applications.
Last October, the GSE regulator revised the Home Affordable Refinance Program to reach more underwater borrowers. The changes known as HARP 2.0 were fully implemented in early March. The Fed conducted its survey in April.
Fifteen large banks said they expect to approve over 60% of the HARP 2.0 applications they receive, including five large banks that expect an 80% or higher approval rate based on their experience to date. Only two small banks expect to have an approval rate above 60%. Five small banks estimate their approval rate will be below 40%.
The Fed asked special questions about the HARP 2.0 program in its periodic survey of senior loan officers. The Fed also posed a special question in its April survey related to the banks’ lending policies with respect to Fannie and Freddie loans.
The lenders indicated they would be willing to make more loans to borrowers with 720 credit scores and 10% down except for one hang-up—private mortgage insurance.
“Most banks cited borrowers having higher costs for, or greater difficulty in obtaining, mortgage insurance coverage as an important factor to the reduced likelihood of originating GSE-eligible mortgage loans,” the Fed said.
The April survey discovered that some banks tightened their underwriting standards for nontraditional mortgages over the previous three months, but not for prime mortgages.
Twenty of the 53 respondent banks noted stronger demand for prime loans, while eight of the 26 banks that originate nontraditional loans reported stronger demand for adjustable-rate mortgages, payment-option, interest-only and alt-A products.
The Fed does not count subprime loans as nontraditional loans.
