HARP 2.0 was announced by the Administration and the Federal Housing Finance Administration (FHFA), the GSE regulator, in October 2011. While not a new program, HARP 2.0 turbo-charges the Home Affordable Refinance Program (HARP), announced in March 2009. The expansion helps underwater homeowners who owe significantly more on their mortgage than their homes are worth. This Paper focuses on how to originate a HARP loan for borrowers with LTVs greater than 80 percent, how changes in solicitation rules can help you expand the market you serve, and how you can immediately implement HARP in your organization.For more information, go to www.nafcu.org/primealliance.

1. HARP 2.0 Briefing Paper
Prime Alliance Solutions, Inc.
February 2012
Dan Green, EVP Credit Union Solutions
dgreen@primealliancesolutions.com
(608) 770-7861
© 2012 Prime Alliance Solutions, Inc. All Rights Reserved. 1

2. HARP 2.0 Briefing Paper
Prime Alliance Solutions, Inc.
February 2012

3. Table of Contents
The HARP 2.0 Program 4
Important HARP Dates 4
Three Important Things to Know about HARP 2.0 5
Executive Summary 6
HARP History / Background 7
The HARP 2.0 Population 8
HARP Marketing Guidelines 8
How are other lenders positioning for HARP 2.0? 9
Summary 10

4. The HARP 2.0 Program
HARP 2.0 was announced by the Administration and the Federal Housing Finance
Administration (FHFA), the GSE regulator, in October 2011. While not a new program,
HARP 2.0 turbo-charges the Home Affordable Refinance Program (HARP), announced
in March 2009. The expansion helps underwater homeowners who owe significantly
more on their mortgage than their homes are worth. This Paper focuses on how to
originate a HARP loan for borrowers with LTVs greater than 80 percent, how changes
in solicitation rules can help you expand the market you serve, and how you can imme-
diately implement HARP in your organization.
Important HARP Dates
March 2009 March 17, 2012
HARP Announced Fannie Mae DU Refi Plus™ HARP
enhancements implemented.
October 2011
HARP 2.0 Announced June 1, 2012
New product: 15 year FRM, Refi Plus
December 1, 2011 LTV > 125% (MBS and Whole Loan)
Fannie Mae Refi Plus™ HARP loans
with application dates on or after this New product: 15 year FRM, Refi Plus
date are eligible for purchase. LTV 105.01 through 125%
(MBS and Whole Loan)
Waiver of certain lender
representations and warranties. New product: 30 year FRM, Refi Plus
LTV > 125% (MBS)
January 1, 2012
Loans purchased on or after this December 31, 2013
date are eligible for reduction and HARP Ends: loans must be originated
elimination of Loan Level Price on or before.
Adjustments (LLPA) and Adverse
April 30, 2014
Market Delivery Charges (AMDC)
The last date Fannie Mae will make
February 1, 2012 whole loan HARP purchases.
New product: 30 year FRM, Refi
Plus™ LTV > 125% (Whole Loan)
Source: Fannie Mae Selling Guide Announcement SEL-2011-12. For more detailed information about
marketing and making HARP 2.0 loans to your members and potential members, please see this
publication, available on Fannie Mae’s website at www.efanniemae.com.
© 2012 Prime Alliance Solutions, Inc. All Rights Reserved. 4

5. Three Important Things to Know about HARP 2.0
The three most important things to know about the expansion of HARP are these:
1. HARP 2.0 helps those significantly underwater homeowners who
have made their mortgage payments, despite the economic
difficulties of recent years. HARP loans are refinanced loans made
to borrowers who have demonstrated a capacity and commitment
to make good on their mortgage obligation through a period of
severe economic stress and house price declines. While LTVs were
capped at 125% LTV under earlier versions of the program for both
fixed-rate and ARM loans, which limited HARP’s reach, LTV limits
have been lifted for fixed-rate loans with amortization terms of 30
years or less under HARP 2.0.
2. Any lender can refinance any HARP-eligible borrower (see the
sidebar: HARP Marketing Guidelines). While this has been true for
some time under existing HARP guidelines, it is often misconstrued.
Representation and warranty relief has also been available to lenders
under HARP guidelines, a fact that is also often misunderstood.
Lenders take on no additional risk by refinancing borrowers under
HARP. In fact, under the latest set of guidelines, refinancing a
borrower using HARP could lessen previous representations and
warrants on loans the lender previously sold to the GSEs.
3. HARP 2.0 caps Loan Level Price Adjustments (LLPAs), making
refinances more affordable for your borrowers. For loans with terms
greater than 20 years secured by a principal residence with an LTV
over 80%, the cumulative LLPA charge is capped at .75%, including
the .25% Adverse Market Delivery Charge (AMDC). For loans with
terms of 20 years or less and 80% LTV or higher secured by the
borrower’s principal residence, the cumulative LLPA charge is zero!
These three points summarize why HARP 2.0 is important to members and to credit
unions: It eases economic burdens while creating tremendous opportunity.
© 2012 Prime Alliance Solutions, Inc. All Rights Reserved. 5

6. Executive Summary
HARP 2.0, announced by the Obama Administration and the FHFA in October 2011,
has the potential to help between one and five million homeowners refinance their
mortgage, making both their home and their mortgage more affordable. It’s another
step toward stabilizing the housing market.
Why is HARP 2.0 important to credit unions? Because it is clearly not a same lender
program, which was the inaccurate perception of the original Home Affordable Refi-
nance Program. The reality, under the initial phase of HARP, was that any lender could
refinance any eligible borrower, although not much of this type of lending took place.
The challenge was lender representations and warranties, hence the perception of the
same-lender restriction.
The representations and warranties offered on Desktop Underwriter® (DU®) loans is
also significant. When refinancing HARP-eligible borrowers under Fannie Mae’s DU
Refi Plus™, the lender will receive the benefit of limited representations and warran-
ties associated with a DU underwritten loan. While certain restrictions apply, spelled
out in Fannie Mae’s Selling Guide, this limits the risk of helping HARP-eligible borrow-
ers.
WHY THIS IS IMPORTANT TO YOUR CREDIT UNION:
Many lenders, including the very largest, have already done their borrower targeting.
They will begin aggressively soliciting eligible homeowners for HARP 2.0 as soon as
the DU and LP updates are released. These borrowers include your members. Keep
your members at your credit union. Attract more members. Do your borrower target-
ing NOW so you’ll be ready as well.
Read on for the details.
© 2012 Prime Alliance Solutions, Inc. All Rights Reserved. 6

7. HARP History / Background
The Obama Administration and the Federal Housing Finance Administration an-
nounced HARP 2.0 in October 2011 to further help underwater homeowners refinance
their loans, homeowners who otherwise would have been unable to refinance. An
underwater homeowner is any homeowner whose mortgage balance is greater than
their home’s value, which presents a quandary. People in this situation cannot sell their
house because they cannot afford to take the loss. Writing a check for tens or hun-
dreds of thousands of dollars is simply not feasible for most Americans. They also may
not be able to afford their existing mortgage payments, adding irony to the quandary.
Refinancing to a lower rate makes the mortgage affordable. Refinancing wasn’t an
option, however, due to property values. Rock? Hard place? For sure. These are the
borrowers HARP 2.0 will help.
HARP 2.0 is not a new program. Rather, it lifts many of HARP’s real and perceived
restrictions. Credit standards have been relaxed. LTV restrictions have been lifted for
fixed-rate loans. Loan Level Price Adjustments (LLPAs) for loans with a term of 20 years
or less have been reduced to zero, while LLPAs for loans with longer terms have been
significantly reduced. As a result, refinancing under HARP 2.0 is much more acces-
sible as well as much more affordable. There’s no reason every HARP-eligible borrower
shouldn’t take advantage of this opportunity as interest rates hit historic lows.
HARP 2.0 won’t, on its own, jumpstart the housing market. However, lower mortgage
payments could result in fewer delinquencies, short-sales, and foreclosures, which in
turn should help stabilize housing prices. It’s one important step along the way to a
much needed and long-overdue housing recovery, one in which credit unions ought to
participate.
© 2012 Prime Alliance Solutions, Inc. All Rights Reserved. 7

8. The HARP 2.0 Population
How many homeowners qualify for HARP 2.0? Estimates range from just under one
million to more than five million. While neither is accurate, there seems to be some
consensus toward the higher end of the range.
The size of the HARP-eligible population is estimated between two and four million
borrowers. Compare that with the projected overall size of the mortgage market in
2012, which is roughly 5.6 million loans. HARP could comprise between 40% and 70%
of this year’s entire mortgage market. Perhaps coincidentally, perhaps not, the Mort-
gage Bankers Association’s refinance estimate for this year is 59%.
How many potential HARP borrowers are credit union members? With six percent mar-
ket share, that could be 120,000 to 240,000. Your credit union does not have to be the
borrower’s current lender in order to refinance the loan. Your credit union has mem-
bers who are eligible for HARP 2.0 loans, members whose loans your credit union does
not have. Time to figure out who they are. Time to refinance their loan.
HARP Marketing Guidelines for a particular GSE, regardless of whether the
lender or a third-party owns the associated
Of the many significant changes introduced Fannie Mae MBS pools or Freddie Mac PC
by HARP 2.0, this may be the most significant. pools.
Any lender may solicit any HARP-eligible
All other provisions of the Selling Guide,
borrower for a refinance, whether or not that
B2-1.2-05, Prohibited Refinancing Practices,
lender made or services the original loan. In
regarding refinance practices remain in effect.
addition to making HARP much more accessi-
ble to borrowers, it makes the program much If lenders choose to reach out to borrowers,
more competitive for lenders. The following and the lender’s communication includes a
information is taken from Fannie Mae Selling reference to a GSE, then the communication
Guide Announcement SEL 2011-12: must include the following:
Requirements for the solicitation of Refi Plus “Freddie Mac and Fannie Mae have adopted
and DU Refi Plus mortgage loans with LTV changes to the Home Affordable Refinance
ratios greater than 80%: Program (HARP) and you may be eligible to
take advantage of these changes.”
“Lenders may solicit borrowers with mort-
gages owned or securitized by a particular “If your mortgage is owned or guaranteed by
government-sponsored enterprise (GSE), pro- either Freddie Mac or Fannie Mae, you may be
vided that the lender simultaneously applies eligible to refinance your mortgage under the
the same advertising and solicitation activities enhanced and expanded provisions of HARP.”
with respect to borrowers of mortgage loans
with LTV ratios greater than 80% and owned “You can determine whether your mortgage is
or securitized by the other GSE. owned by either Freddie Mac or Fannie Mae
by checking the following websites:
Lenders must apply the same advertising and
solicitation activities to all mortgage loans www.freddiemac.com/mymortgage
with LTV ratios greater than 80% and serviced http://www.fanniemae.com/loanlookup/ .”
Source: Fannie Mae Selling Guide Announcement SEL-2011-12
© 2012 Prime Alliance Solutions, Inc. All Rights Reserved. 8

9. How are other lenders positioning for HARP 2.0?
There has not been a great deal of HARP 2.0 activity yet as the GSEs complete the
necessary DU and LP upgrades in March of this year. While HARP 2.0 loans can be
originated and closed before then, not all the features are available and underwriting
is mostly a manual process. DU and LP enhancements make the program much more
attractive and accessible to borrowers and to lenders.
Large lenders aren’t biding their time. They got to work as soon as the program was
announced by determining exactly which borrowers are eligible and whether the bor-
rower is an existing customer. The day DU and LP are ready, many lenders will begin
aggressively marketing refinances to those who are eligible, including your members.
There is still time to act even if your credit union has not taken the same steps. It’s rela-
tively easy to figure out who among your mortgage-borrowing members are eligible.
You should be in contact with them right now, offering to refinance as soon as HARP
2.0 is fully functional. Originate in March, close in April. The point, of course, is taking
them off the market. Large lenders have already done their targeting work. They will
be contacting your mortgage-holding members. Some may have done so already.
It’s not much harder to know who among your non-mortgage members financed their
home and who is HARP-eligible. Matching your members’ addresses with publicly
available mortgage data will yield a wealth of information about where your mem-
bers did their borrowing. What loan product did they use? What rate are they paying?
What’s the term? In short, you can discover everything you need to know to determine
HARP-eligibility.
Yet, there’s a reason to go through this targeting exercise beyond making HARP loans
and beyond beating your competitors to the punch. With slight variation, the lessons
learned in finding and helping HARP-eligible borrowers also apply to purchase-money
lending, a market that will come back within the next several years.
© 2012 Prime Alliance Solutions, Inc. All Rights Reserved. 9

10. Summary
HARP 2.0 has the potential to help as many as five million underwater homeowners, an
important step in stabilizing the housing market. It will only work if lenders, including
credit unions, step in and participate. This is an opportunity to take part in the nation’s
economic recovery.
It’s also good for members. Saving hundreds of dollars per month adds up to several
thousands of dollars per year. Savings increase, other debt is easier to service, and
homes become more affordable, all things for which credit unions stand. HARP 2.0 is a
good mission-fit.
HARP 2.0 is also a good opportunity to remind your members and your communities
that your credit union is an active, capable, and helpful mortgage lender. Help current
HARP-eligible members and keep them at your credit union. Attract new members by
targeting HARP-eligible borrowers. Many lenders are doing just that, seeing this pro-
gram as a significant marketing opportunity.
And, we learn valuable purchase-money marketing lessons in marketing HARP, lessons
we will need for the coming purchase market.
© 2012 Prime Alliance Solutions, Inc. All Rights Reserved. 10