Home Affordable Refinance Program - A Mid-Program Assessment

Home Affordable Refinance Program

A Mid-Program Assessment

Evaluation Report  EVL–2013–006  August 1, 2013

Federal Housing Finance Agency

Office of Inspector General

Synopsis

———

August 1, 2013

Home Affordable Refinance Program

Why OIG Did This Report

The Federal Housing Finance Agency (FHFA), in coordination with the U.S.

Department of the Treasury (Treasury), announced the Home Affordable

Refinance Program (HARP or program) in March 2009. HARP is a

streamlined refinance program for loans owned or guaranteed by Fannie Mae

or Freddie Mac (collectively, the Enterprises) that is designed to assist

borrowers who are current on their loans, but have not been able to refinance

because they have little or no equity in their homes.

FHFA Office of Inspector General (OIG) conducted this program evaluation to

assess FHFA’s administration and oversight of HARP.

What OIG Found

When HARP was announced in March 2009, Treasury and FHFA estimated

that four to five million borrowers would have the opportunity to refinance

under the program. As of September 2011, however, fewer than one million of

those borrowers had refinanced. Based on consultations with lenders and

feedback from borrowers, FHFA directed the Enterprises to modify the

program, which resulted in HARP 2.0. The program is currently scheduled to

expire on December 31, 2015.

As a result of the initial HARP 2.0 program modifications and subsequent

changes made throughout 2012 and 2013, HARP refinance volume has

substantially increased. As of March 2013, 2.4 million HARP refinances had

been completed. It is difficult, however, to project how many HARP-eligible

loans will ultimately be refinanced. Several unknown variables, including

interest rates, lender participation, and borrowers’ willingness to refinance,

make any estimate uncertain.

Today, impediments to the program’s success remain. Educating borrowers

and encouraging their participation continues to be a major challenge. FHFA is

planning to address this by implementing a nationwide public education

campaign.

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TABLE OF CONTENTS ................................................................

TABLE OF CONTENTS .................................................................................................................3

ABBREVIATIONS .........................................................................................................................5

PREFACE ........................................................................................................................................6

CONTEXT .......................................................................................................................................7

The Benefits and Obstacles of Refinancing a Mortgage ..........................................................7

HARP ........................................................................................................................................8

HARP 1.0 ..........................................................................................................................9

HARP 2.0 ........................................................................................................................10

PROGRAM ASSESSMENT .........................................................................................................12

1. FHFA’s Administration of HARP ..................................................................................12

Consulting with Stakeholders .................................................................................................12

Stakeholder Meetings .....................................................................................................12

Borrower Survey .............................................................................................................15

FHFA Initiatives .....................................................................................................................15

State-Level Programs ......................................................................................................15

Nationwide HARP Education Campaign .......................................................................16

FHFA Reporting and Website ........................................................................................16

2. Analysis of Performance Data and Program Outcomes .................................................17

FHFA ......................................................................................................................................17

Borrowers ...............................................................................................................................18

Decrease in Monthly Mortgage Payments ......................................................................18

Increase in High LTV Refinances ..................................................................................19

Increase in Mortgage Stability ........................................................................................20

Focus on Refinancing Primary Residences ....................................................................20

Enterprises ..............................................................................................................................21

Credit Risk Benefit .........................................................................................................21

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Guarantee Fee Benefit ....................................................................................................22

Retained Portfolio Cost ...................................................................................................22

Representation and Warranty Relief Cost ......................................................................23

Opportunity Cost.............................................................................................................24

3. Remaining Barriers .........................................................................................................24

Borrower Challenges ..............................................................................................................24

Borrower Knowledge ......................................................................................................24

Origination Fees and Closing Costs................................................................................26

Mortgage Insurance ........................................................................................................26

Lender Challenges ..................................................................................................................27

4. The Future .......................................................................................................................28

CONCLUSION ..............................................................................................................................29

OBJECTIVE, SCOPE, AND METHODOLOGY .........................................................................30

ADDITIONAL INFORMATION AND COPIES .........................................................................32

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ABBREVIATIONS .......................................................................

Enterprises Fannie Mae and Freddie Mac

Fannie Mae Federal National Mortgage Association

FHFA Federal Housing Finance Agency

Freddie Mac Federal Home Loan Mortgage Corporation

G-Fee Guarantee Fee

HARP or program Home Affordable Refinance Program

HERA Housing and Economic Recovery Act of 2008

HHF Hardest Hit Fund

LPMI Lender Paid Mortgage Insurance

LTV Loan-to-Value Ratio

MBS Mortgage-Backed Securities

OIG Federal Housing Finance Agency Office of Inspector General

Treasury U.S. Department of the Treasury

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PREFACE ...................................................................................

OIG was established by the Housing and Economic Recovery Act of 2008 (HERA),

which amended the Inspector General Act of 1978.

OIG is authorized to conduct audits,

investigations, and other studies of the programs and operations of FHFA; to recommend

policies that promote economy and efficiency in the administration of such programs and

operations; and to prevent and detect fraud and abuse in them.

This report provides an assessment of HARP, which is designed to assist borrowers who have

little or no equity in their homes to refinance their home loans, as long as they are current on

their mortgage payments. As of March 2013, more than 2.4 million homeowners have

obtained a HARP refinance.

This report was prepared by Alexa Strear, Investigative Counsel, and Brian Harris,

Investigative Counsel. OIG appreciates the assistance of FHFA, Fannie Mae, and Freddie

Mac staff in completing this report. It has been distributed to Congress, the Office of

Management and Budget, and others and will be posted on OIG’s website, www.fhfaoig.gov.

George F. Grob

Deputy Inspector General for Evaluations

Pub. L. No. 110-289.

Pub. L. No. 95-452.

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CONTEXT ..................................................................................

The Benefits and Obstacles of Refinancing a Mortgage

Refinancing a mortgage is a common practice for American home owners. The process

involves a borrower acquiring a new loan to pay off the original mortgage in full.

This

releases the borrower from the terms of the original mortgage while binding the borrower to

the terms of the new one. Most residential mortgage contracts in the United States contain no

borrower prepayment penalty. Thus, at any time, a borrower has the option to prepay a

mortgage in full without penalty. Because refinancing a mortgage involves obtaining an

entirely new mortgage, however, the borrower is subject to many of the standard upfront costs

associated with any new mortgage. These costs are associated with a new appraisal,

origination fees, title search and insurance, attorney and settlement fees, and taxes.

There are several reasons a borrower may want to refinance a mortgage. A borrower may

wish to obtain a lower interest rate,

reduce the aggregate monthly payment, obtain a different

amortization period, or change the mortgage product (e.g., move from an adjustable rate

mortgage to a fixed rate mortgage). A borrower’s incentive to refinance increases as interest

rates fall because the cost of borrowing money is reduced. Accordingly, the borrower’s

monthly housing payment can be decreased by refinancing to a mortgage with a lower interest

rate. For example, the United States experienced refinancing waves in 1992-1993, 1998, and

2001-2003. During each of those three time periods, interest rates fell more than two

percentage points.

There are certain environmental and borrower

variables that can make it more difficult to refinance a

mortgage, including (1) tightened lending standards,

(2) poor borrower credit, and (3) changes in property

values that reduce the borrower’s equity. Each of these

three obstacles has manifested itself as a result of the

recent housing crisis, making it difficult for some

borrowers to take advantage of record-low interest

rates. For example, a traditional refinance of an Enterprise-owned mortgage requires a

borrower to have a maximum loan-to-value (LTV) ratio of 80%, unless the loan contains a

credit enhancement such as mortgage insurance. As home prices fell during the housing crisis,

The term “borrower” in this report refers to a mortgagor – a person who has obtained a loan in exchange for a

security interest in the property.

By borrowing at a lower interest rate, a borrower will pay less interest over the term of a loan.

The loan-to-value ratio

is calculated by dividing a

mortgage’s unpaid principal

balance by the current market

value of the property securing

the mortgage.

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homeowners lost a portion of the equity they once had in their homes. For many borrowers,

the lower home value left them with little remaining equity or, worse, underwater on their

mortgages.

These highly leveraged borrowers are often unable to refinance their loans

through conventional means, even if they have good credit and are paying their mortgages

timely.

HARP

In March 2009, FHFA, in conjunction with Treasury, announced HARP. HARP is a

streamlined refinance program for loans owned or guaranteed by the Enterprises that is

designed to assist borrowers who (1) have little or no equity in their homes, and (2) are

current on their monthly mortgage payments. To qualify for this streamlined refinance

opportunity, a borrower must satisfy a variety of eligibility requirements, which have changed

several times during the program’s history. Figure 1 outlines today’s eligibility criteria.

FIGURE 1. HARP-ELIGIBILITY CRITERIA AS OF JUNE 2013

Loan Requirements

Borrower Requirements

Result Requirements

 Current LTV must be

greater than 80%

 Loan must be owned or

guaranteed by the

Enterprises

 Loan must have been

delivered to the

Enterprises on or before

May 31, 2009

 Loan must be a first lien

 Borrower must be current on

the mortgage payments at the

time of the refinance

 Borrower has had no late

payments on the mortgage in

the past 6 months

 Borrower has had no more

than one late payment on the

mortgage in the past 12

months

 Borrower has not previously

refinanced under HARP

 HARP refinance must result in at

least one of the following benefits

to the borrower:

 A reduction in the borrower’s

monthly principal and interest

payment

 A reduction in the borrower’s

interest rate

 A reduction in the amortization

term

 A conversion to a more stable

mortgage product

In addition to allowing HARP-eligible borrowers to take advantage of historically low interest

rates, the program allows them to refinance into mortgages that may lower their monthly

mortgage payments, move them to more stable mortgages, or shorten their mortgage terms to

build equity faster. By helping this subset of borrowers refinance into mortgages with more

favorable terms, FHFA hopes to reduce the risk of future defaults.

A mortgage is considered underwater if the borrower owes the lender more than the market price of the

home.

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To establish HARP, FHFA directed the Enterprises to define specific eligibility requirements

and to implement the program. However, as secondary market participants, the Enterprises

do not directly lend to borrowers. Thus, a HARP-eligible borrower must refinance with a

mortgage lender in the primary market to participate in the program. Because neither FHFA

nor the Enterprises have the authority to require lenders to originate loans, lender participation

in HARP is entirely voluntary. Nevertheless, by directing the Enterprises to implement

HARP, FHFA is seeking to create a lending environment in which HARP-eligible borrowers

are able to obtain financing from lenders.

HARP 1.0

When HARP 1.0 was announced, Treasury and FHFA estimated that four to five million

borrowers would have the opportunity to refinance under the program.

This estimate

represented the number of borrowers who were eligible for a HARP 1.0 refinance at that time.

By September 2011, however, 987,910 borrowers had completed HARP 1.0 refinances.

FHFA, the Enterprises, lenders, and other stakeholders identified several issues with HARP

1.0 that were causing this lackluster result. Among them were:

 Loans with LTVs greater than 125% were not eligible for HARP 1.0 refinances;

 The short program duration of approximately 15 months discouraged lenders from

investing resources to market and originate

HARP loans;

 The risk of representation and warranty

liability deterred lender originations;

 Manual property appraisals were required for

the majority of HARP 1.0 originations;

 Lenders were not permitted to solicit directly

HARP-eligible borrowers for refinancing; and

 Risk-based fees increased up-front borrower

costs and diminished the benefit of a lower

interest rate.

Detailed reasons for lender participation are described below.

The term “HARP 1.0” refers to the Home Affordable Refinance Program between April 2009 and October

2011. The term “HARP 2.0” refers to the Home Affordable Refinance Program from November 2011 to the

present. The term “HARP” refers to the Home Affordable Refinance Program in its entirety.

Representations and

warranties are assurances that

lenders make to the Enterprises

about the quality of loans being

purchased or guaranteed by

the Enterprises. If an Enterprise

determines that a loan does

not meet the criteria that the

lender claimed the loan met,

then the Enterprise may issue a

request to the lender to

repurchase the loan.

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Accordingly, FHFA directed the Enterprises to collaborate with stakeholders to address these

concerns and improve the program. After several modifications were agreed upon, FHFA

publicly announced them in October 2011, rebranding the program as HARP 2.0.

HARP 2.0

a. October 2011 Modifications

FHFA’s initial HARP 2.0 modifications incorporated five important changes to the HARP-

eligibility criteria. First, FHFA and the Enterprises removed the 125% LTV ceiling. This

expanded the HARP-eligible population to include seriously underwater borrowers. Second,

FHFA extended HARP’s duration by 18 months. This extension was intended to increase

lender participation. Third, the Enterprises eliminated the manual property appraisal

requirement.

This helped streamline the refinancing process and reduced borrower costs.

Fourth, the Enterprises lowered the maximum amount of risk-based fees.

And fifth, the

Enterprises revised lender solicitation guidelines and permitted lenders to offer additional

incentives to borrowers.

b. 2012 and 2013 Modifications

After receiving feedback from stakeholders, FHFA and the Enterprises announced several

additional changes to HARP 2.0 in 2012 and 2013. To incentivize lender participation, the

Enterprises (1) granted substantial representation and warranty relief for certain HARP

refinances, and (2) reduced documentation requirements. Additionally, FHFA extended

HARP an additional two years – the program is now scheduled to end on December 31, 2015.

A manual property appraisal is not necessary if the Enterprises’ automated valuation models can provide a

reliable valuation. Automated valuation models are statistically based programs that use information such as

comparable home sales, property characteristics, tax assessments, and price trends to provide an estimate of

value for a specific property. Each Enterprise has its own proprietary automated valuation model.

Risk-based fees, also referred to as “loan level price adjustments” or “delivery fees,” are fees the Enterprises

charge lenders based on higher-risk loan characteristics, such as low credit scores, high LTVs, or limited

income and asset documentation.

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FIGURE 2. HARP TIMELINE

•March 4: FHFA announced the Home Affordable Refinance Program

•July 1: FHFA raised the HARP-eligible LTV ceiling from 105% to 125%

2009

•March 1: FHFA extended HARP's end date from June 10, 2010, to June 30, 2011

2010

•March 11: FHFA extended HARP's end date from June 30, 2011, to June 30, 2012

•August 19: FHFA directed the Enterprises to collaborate with stakeholders to improve HARP 1.0

•October 24: FHFA publicly announced HARP 2.0; FHFA extended HARP's end date from June 30,

2012, to December 31, 2013

2011

•September 11: FHFA announced additional representation and warranty relief for HARP 2.0 loans

•September 14: The Enterprises announced changes to the income and asset documentation

requirements for HARP 2.0 loans

2012

•March 19: FHFA announced that it will implement a nationwide HARP education campaign

•April 11: FHFA extended HARP's end date from December 31, 2013, to December 31, 2015

2013

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PROGRAM ASSESSMENT ..........................................................

OIG assessed HARP by (1) examining FHFA’s administration of the program, (2) analyzing

performance data and program outcomes, and (3) identifying the remaining program barriers.

1. FHFA’s Administration of HARP

As indicated above, HARP 1.0 produced less than anticipated results. After approximately

two and one-half years, fewer than one million of the four to five million HARP-eligible loans

had been refinanced. Consequently, FHFA acted to improve the program by collecting and

implementing stakeholder feedback, and establishing other initiatives.

Consulting with Stakeholders

FHFA actively engaged with stakeholders to identify and address problems with HARP. To

capture the perspective of those involved in the lending process, FHFA facilitated meetings

among the Enterprises, lenders, and mortgage insurers. To understand the issues facing

borrowers, Fannie Mae conducted a comprehensive survey of HARP-eligible borrowers in

2012; the results of this survey were shared with FHFA.

Stakeholder Meetings

As indicated above, lenders and mortgage insurers are stakeholders whose voluntary

participation is necessary for HARP to be successful. Without lender participation, borrowers

cannot secure HARP refinances. Additionally, because there are special mortgage insurance

requirements for HARP loans, the participation of mortgage insurers is also important.

Working with lenders, FHFA and the Enterprises identified several barriers to lender

participation during HARP 1.0. For example, many lenders established additional HARP-

eligibility standards above and beyond those required by the Enterprises. This resulted in

fewer refinances as well as borrower confusion about HARP eligibility.

Beginning with HARP 2.0, FHFA started facilitating

regular meetings among the Enterprises, lenders, and

mortgage insurers. At these meetings, stakeholders share

concerns and constructive criticism about HARP. After

receiving feedback from lenders, FHFA and the

Enterprises decided to modify HARP. The changes

included (1) providing representation and warranty relief

for certain loans, (2) reducing documentation

requirements, (3) aligning same servicer and new

lender requirements, and (4) aligning Fannie Mae’s and

A same servicer refinance

refers to a borrower

refinancing a loan with the

current servicer. A new

lender refinance refers to a

borrower obtaining a loan

from a third-party lender that

does not currently service the

borrower’s loan.

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Freddie Mac’s HARP guidelines. These changes were made to increase lender participation

and enhance borrower understanding of the program.

Reducing Lender Representation and Warranty Exposure. During HARP’s infancy, lenders

were hesitant to participate in the program because the new loans could expose them to new

representation and warranty liability. This was an issue for both new lenders and same

servicers. New lenders declined to refinance HARP-eligible loans because they did not want

the representation and warranty liability for new, high-LTV loans. Moreover, same servicers

declined to refinance HARP-eligible loans because they preferred to keep the representation

and warranty risk associated with the original loan.

To reduce their representation and warranty exposure,

lenders imposed a variety of credit and process

overlays. These overlays, in effect, prevented higher-

risk HARP-eligible borrowers from refinancing with

those lenders. Thus, lenders restricted HARP refinances

to lower-risk borrowers who exposed them to less

representation and warranty risk. For example, some

lenders declined to refinance loans with LTVs greater

than 105% or loans that they did not currently service.

FHFA and the Enterprises addressed this issue by waiving certain representations and

warranties for HARP refinances. In November 2011, the Enterprises relieved certain

representations and warranties associated with the original loan for same servicer refinances.

Despite this modification, lenders continued to communicate to FHFA and the Enterprises

that representation and warranty liability was an impediment to their participation.

Consequently, in September 2012, FHFA directed the Enterprises to relieve all HARP lenders

of liability for the following:

 Representations and warranties associated with the original loan; and

The Enterprises generally review loans that default within the first two years of origination for violations

of representations and warranties. If a representation and warranty violation is found, the Enterprises require

the servicer to repurchase the mortgage. Historically, the Enterprises did not review as many loans that

defaulted more than two years after origination for breaches of representations and warranties because they

assumed that those loans defaulted for reasons unrelated to violations of representations and warranties

(e.g., unemployment). As a result, servicers believed that it was better to keep a loan that had a good payment

history for several years rather than replace it with a new loan that could default within two years, and thereby

unnecessarily expose the servicer to a review of the loan by the Enterprise and possible repurchase request. In

September 2012, the Enterprises announced that they were changing their process for reviewing loans for

breaches of representations and warranties.

Credit and process overlays

are additional criteria that

lenders impose on top of

the Enterprises’ HARP

requirements, including

lower LTV ratios, higher

credit scores, or greater

documentation requirements.

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 Representations and warranties associated with the new loan regarding (1) standard

eligibility and underwriting; and (2) the value, condition, and marketability of the

mortgaged property.

Reducing Documentation. Lenders informed FHFA and the Enterprises that HARP borrower

documentation requirements were overly burdensome and did not substantially improve

underwriting. Consequently, the Enterprises generally reduced the income and asset

documentation requirements, which improved lender efficiency.

For example, prior to these

modifications, lenders were in some cases required to collect two years of a borrower’s

income history to establish stability and continuity. Today, lenders are not required to collect

such documentation, which helps lenders streamline the refinance process.

Aligning Same Servicer Refinances and New Lender Refinances. Through stakeholder

meetings and data collection, FHFA found that same servicer refinances outnumbered new

lender refinances. This was attributable to external factors such as lenders focusing on

refinancing loans for which they already had underwriting data. However, as lenders began to

exhaust their own HARP-eligible loans, FHFA wanted to encourage them to solicit HARP-

eligible borrowers outside of the pool of loans they currently service. To facilitate this, FHFA

and the Enterprises have generally aligned the same servicer and new lender HARP

requirements.

Aligning Fannie Mae and Freddie Mac. FHFA has

worked to narrow the differences between the

Enterprises’ HARP programs. Initially, Fannie Mae and

Freddie Mac developed and implemented HARP within

their own companies. This created differences between

their programs, both substantively and procedurally,

which made HARP refinancing more complicated for lenders. FHFA worked with the

Enterprises to reduce these differences by aligning the majority of their HARP guidelines.

Today, the Enterprises’ policies differ in one significant respect – the borrower’s option to

add closing costs to the loan’s principal balance. Freddie Mac limits the amount of refinance

proceeds that can be used for closing costs to the lesser of 4% of the current unpaid principal

The representation and warranty relief for new HARP loans applies if a borrower has an acceptable payment

history. An acceptable payment history means the borrower has not been 30 days delinquent during the first 12

months following the date that the Enterprise acquires the HARP loan. Borrowers satisfy this requirement in

the vast majority of HARP refinances.

Today, one distinct process difference – income verification requirements – remains between same servicer

and new lender refinances. Generally, same servicers are required to verbally verify a borrower’s source of

income, whereas new lenders are required to obtain documentation to verify the borrower’s source of income.

This process difference exists because same servicers have an informational advantage over new lenders, such

as access to the borrower’s original loan file and mortgage payment history.

Refinance proceeds refers

to the money the borrower

receives to pay off the original

loan.

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balance of the original loan or $5,000; Fannie Mae does not limit the borrower’s use

of refinance proceeds for closing costs.

Borrower Survey

There are a number of borrowers who are eligible for HARP but who have not refinanced.

Fannie Mae conducted a survey of these borrowers and borrowers who have completed a

HARP refinance. The objective of the survey was to understand (1) why borrowers are not

taking advantage of HARP, (2) the role that servicers and lenders play in encouraging HARP-

eligible borrowers to refinance, and (3) which solicitation techniques and incentives impact

borrowers’ willingness to refinance. Fannie Mae made three key findings:

 Some HARP-eligible borrowers, especially high-LTV borrowers, are not refinancing

because they do not think they qualify;

 Current servicers are best situated to encourage HARP-eligible borrowers to refinance

because these servicers are the borrowers’ point of contact; and

 HARP-eligible borrowers may be encouraged to refinance if offered incentives.

Fannie Mae shared the results of its survey with FHFA. FHFA should use the findings in this

survey when designing and deploying its nationwide HARP education campaign.

FHFA Initiatives

State-Level Programs

FHFA is seeking to increase HARP refinance volume

by pursuing state-level support for the program. For

example, FHFA is working with state housing finance

agencies that receive funds from Treasury’s Hardest Hit

Fund (HHF).

FHFA has worked with agencies in

Arizona and Nevada to allocate a portion of their HHF funds to support HARP refinances.

Also, at the state level, Michigan allocated $5 million that it received from the National

OIG reviewed borrower complaints made to OIG, to FHFA, and to federal, state, and local law enforcement

agencies about HARP and found that the complaints were consistent with Fannie Mae’s survey findings.

The HHF provides funding to certain state housing finance agencies to help prevent foreclosures and

stabilize housing markets.

The Enterprises’ HARP guidelines permit borrowers to use HHF funds to pay down the existing unpaid

principal balance or to pay closing costs for HARP refinanced loans as long as the borrower does not have to

repay the state agency.

Refinance volume refers to

the number of completed

HARP refinances.

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Mortgage Settlement to assist borrowers with HARP refinances.

As a result of these efforts,

HARP-eligible borrowers are receiving funds that they may otherwise not have; this extra

incentive may be the deciding factor in a borrower’s decision to take advantage of HARP and

refinance.

Nationwide HARP Education Campaign

In March 2013, FHFA announced that it will be implementing a nationwide public relations

campaign to educate borrowers about HARP. This announcement was made in conjunction

with FHFA’s decision to extend HARP through the end of 2015. The campaign is specifically

intended to address the borrower misconceptions that Fannie Mae identified in its borrower

survey. FHFA has hired a public relations firm to coordinate and implement the campaign.

FHFA Reporting and Website

FHFA collects refinance data from the Enterprises and publishes monthly refinance reports,

which are available to the public. The reports include an overview of HARP as well as certain

performance metrics. The analysis in these reports is primarily based on the number of HARP

refinances completed during that particular month.

To put these data in better perspective, however, FHFA

could compare the number of HARP refinances

completed in a month to the total number of HARP-

eligible mortgages remaining at the end of the prior

month. The ratio of these two numbers is referred to as

the pull-through rate. Both Enterprises keep these data

and analyze them regularly. Although FHFA has access

to these data, it has not released these figures to the public.

FHFA also maintains information about HARP on its website; however, the information is

limited and disorganized.

The HARP-related textbox on FHFA’s homepage does not

describe what HARP is or how borrowers can benefit from it. For additional information, the

textbox directs readers to three external websites before linking them to FHFA’s HARP

webpage.

Similar to the homepage, FHFA’s HARP webpage lacks important details about HARP. For

example, it does not describe the basic eligibility requirements. Rather, it is a compilation of

Michigan borrowers who are approved for a HARP refinance may be eligible to receive $500 to be applied

toward closing costs.

Accessed on July 18, 2013.

Pull-through rate is the

number of HARP refinances

completed divided by the

total number of HARP-eligible

loans for a given time period.

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links to FHFA press releases and external websites. As of July 18, 2013, two of the eight

bulleted links were broken and another two links were intended for lenders.

2. Analysis of Performance Data and Program Outcomes

OIG collected various data to measure HARP’s performance to date. The following sections

contain an analysis of this data, detailing program outcomes from several different

perspectives.

FHFA

The primary metric FHFA uses to measure the success of HARP is volume. When FHFA

announced HARP 2.0 in October 2011, lenders had completed 987,910 HARP refinances –

the majority of which were for loans with LTVs between 80% and 105%. Thus, more than

two years into the program, only a fraction of the four to five million HARP-eligible

borrowers had refinanced. When FHFA announced HARP 2.0, it projected that the changes

to the program would approximately double the refinance volume to a total of 1.9 million by

the program’s end date of December 31, 2013.

During the first two quarters of 2012, lenders began to implement the HARP 2.0 changes. The

impact of these changes began to show immediately. The HARP monthly refinance volume

started to increase beginning in January 2012 (see Figure 3). As of March 2013, lenders had

completed 2,459,329 HARP refinances – 58% of which were completed under HARP 2.0.

This exceeds the goal of 1.9 million refinances set by FHFA in October 2011.

Fannie Mae has completed 1,431,927 refinances – 60% of which were completed under HARP 2.0. Freddie

Mac has completed 1,027,402 refinances – 56% of which were completed under HARP 2.0.

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FIGURE 3. TOTAL HARP REFINANCES BY MONTH

Moreover, FHFA incorporates HARP volume in its Annual Performance Plans as one

measure of its strategic goal to preserve and conserve the Enterprises’ assets. FHFA’s

FY2012 goal was to have HARP refinances account for at least 10% of all refinances during

that period. FHFA exceeded this goal – HARP refinances accounted for 18% of all Enterprise

refinances in FY2012. FHFA’s FY2013 goal is to complete 600,000 HARP refinances during

that time period.

During the first six months of the fiscal year, 591,769 HARP refinances have

been completed, which puts FHFA on pace to surpass its FY2013 goal.

Borrowers

In addition to considering HARP volume, OIG requested HARP data from the Enterprises to

understand various borrower-focused program outcomes.

Decrease in Monthly Mortgage Payments

The average borrower’s monthly savings that results from a HARP refinance is an important

outcome. By lowering the borrower’s monthly principal and interest payments, HARP

reduces the risk of future default and potentially stimulates the economy. According to Fannie

Mae’s 2012 data, HARP borrowers saved on average over $250 per month, or $3,000 per

year.

Source: FHFA, Fannie Mae, and Freddie Mac.

Not all HARP loans result in lower monthly mortgage payments. For example, a borrower may increase the

monthly mortgage payment by refinancing into a loan with a shorter amortization period to build equity faster.

20,000

40,000

60,000

80,000

100,000

120,000

140,000

OIG  EVL–2013–006  August 1, 2013 19

FIGURE 4. AVERAGE MONTHLY SAVINGS

Increase in High LTV Refinances

Prior to HARP 2.0, the refinance volume for loans with LTVs greater than 105% was

relatively small. To address this, FHFA directed the Enterprises to make two important

changes: (1) remove the 125% LTV ceiling, and (2) relieve lenders of significant

representation and warranty liability.

Figure 5 illustrates the effect these changes had on high-LTV loans. As lenders began to

implement these changes in early 2012, refinance volume for loans with LTVs between 105%

and 125% began to increase. Then, in June 2012, the Enterprises permitted lenders to deliver

HARP loans with LTVs greater than 125% into special mortgage-backed securities (MBS);

immediately thereafter, refinance volume for these loans dramatically increased.

FIGURE 5. HARP REFINANCES BY LTV: INCEPTION TO MARCH 2013

Source: FHFA, Fannie Mae, and Freddie Mac.

Borrower's

Original Loan

Lender Completes

a HARP Refinance

Borrower's New

HARP Loan

Average Monthly

Savings = $250

Program

Outcome

20,000

40,000

60,000

80,000

100,000

120,000

140,000

LTV > 80% - 105%

LTV 105% - 125%

LTV > 125%

OIG  EVL–2013–006  August 1, 2013 20

Increase in Mortgage Stability

HARP was also designed to place

borrowers in more stable mortgage

products (e.g., 30-year fixed rate

mortgages) or, if possible,

shorten their loan terms to build

equity faster. As shown in

Figure 6, over 75% of HARP

borrowers refinanced into fixed

rate mortgages with terms

greater than 20 years, whereas

less than 1% of borrowers

refinanced into less stable

adjustable rate mortgages. Further, a significant percentage of borrowers chose to refinance

into fixed rate mortgages with terms of 20 years or less, which allows them to build equity in

their homes faster.

Focus on Refinancing Primary Residences

HARP refinances are not limited to

primary residences; both second

homes and investment properties are

HARP-eligible if they meet all the

other HARP criteria.

As shown in

Figure 7, however, the majority of

HARP refinances are for primary

owner-occupied residences. This is

due, in part, to lenders prioritizing

the refinancing of primary

residences before secondary homes

and investment properties.

Source: Fannie Mae. Freddie Mac data reveal a similar trend. Note that the Enterprises only permit

borrowers with LTVs less than 105% to refinance into an adjustable rate mortgage.

Source: FHFA, Refinance Report: March 2013, at 4 (June 12, 2013) (online at

www.fhfa.gov/webfiles/25318/March2013RefinanceReport.pdf).

Both second homes and investment properties have been HARP-eligible from the program’s inception.

76.0%

23.5%

0.5%

Fixed Rate Mortgages > 20 yrs

Fixed Rate Mortgages ≤ 20 yrs

Adjustable Rate Mortgages

FIGURE 6. FANNIE MAE HARP REFINANCES BY MORTGAGE

PRODUCT TYPE: JANUARY TO DECEMBER 2012

FIGURE 7. HARP REFINANCES BY OCCUPANCY TYPE:

INCEPTION TO MARCH 2013

87%

10%

Primary Residence

Second Home

Investment Property

OIG  EVL–2013–006  August 1, 2013 21

Enterprises

As the regulator and conservator of the Enterprises, FHFA is responsible for stabilizing the

mortgage market while simultaneously conserving the Enterprises’ assets. These two

mandates create an inherent tension.

FHFA established HARP in the wake of the housing

crisis as a public policy program. Yet, the program also affects the Enterprises financially.

FHFA has expressed that HARP’s financial impact on the Enterprises is a secondary

consideration to the program’s success. This, however, raises an important question regarding

the conservatorship: what is the potential cost of HARP to the Enterprises and, ultimately, to

taxpayers?

This section explores HARP’s financial impact on the Enterprises. The net impact is primarily

a function of five variables:

 Credit risk

 Guarantee fees

 Retained portfolio investments

 Representation and warranty relief

 Opportunity cost

These variables are individually examined below. Because of the influence of numerous

economic and market forces on these variables, their impact can only be approximated at

best.

However, OIG has reached several general conclusions about these variables.

Credit Risk Benefit

The credit risk associated with a loan indicates the

likelihood of credit losses to the Enterprises as a result

of the loan’s default. Therefore, loans with a high

credit risk are likely to result in more credit losses

than loans with a low credit risk. The Enterprises

model a loan’s credit risk as a function of the borrower’s credit profile, the loan’s LTV, the

See OIG, White Paper: FHFA-OIG’s Current Assessment of FHFA’s Conservatorships of Fannie Mae and

Freddie Mac, at 28-29 (WPR-2012-001) (Mar. 28, 2012) (online at www.fhfaoig.gov/Content/Files/WPR-

2012-001.pdf).

For a detailed analysis of the relationship between the Enterprises and taxpayers, see OIG, Analysis of the

2012 Amendments to the Senior Preferred Stock Purchase Agreements (WPR-2013-002) (Mar. 20, 2013)

(online at www.fhfaoig.gov/Content/Files/WPR-2013-002_2.pdf).

Quantifying an estimate through economic modeling is beyond the scope of this evaluation.

Credit risk refers to the risk

that a borrower will default on

the mortgage.

OIG  EVL–2013–006  August 1, 2013 22

presence of mortgage insurance, the amount of loan documentation, the mortgage product

(e.g., adjustable rate or fixed rate mortgage), the occupancy type, and local and regional

economic conditions.

The credit risk associated with a HARP loan is intuitively lower than the credit risk associated

with its original counterpart. In other words, a HARP borrower is less likely to default on the

new mortgage than on the original mortgage. This flows from the fact that the new mortgage

has, at a minimum, a lower interest rate, a lower monthly payment, or a shorter amortization

term than the original loan. Additionally, the original loan may have been refinanced into a

more stable mortgage product, which also reduces its risk of default. Consequently, the

Enterprises anticipate that new HARP loans will perform better, on the whole, than the

original loans would have, thereby reducing future credit losses.

In this respect, the

Enterprises financially benefit from HARP.

Guarantee Fee Benefit

In exchange for guaranteeing the payment of a loan’s principal and interest to MBS investors,

the Enterprises charge a guarantee fee (g-fee). Today, the Enterprises’ average g-fee to insure

a loan is higher than it was prior to 2009. In other words, the Enterprises charge a greater

premium to insure MBS today than they did before the housing crisis.

Just as a borrower is released from the terms of the original loan during a refinance, the

Enterprises are likewise released from the original g-fee structure. After the borrower

refinances, the Enterprises can securitize the refinanced loan and charge today’s higher g-fee.

Thus, the Enterprises realize a financial benefit in the difference between the g-fee associated

with the original loan and the g-fee associated with the new loan.

Retained Portfolio Cost

HARP refinances negatively impact the Enterprises’

retained portfolios. As part of their business models,

the Enterprises buy and hold individual mortgages and

MBS to earn interest income. These portfolios of

mortgages and MBS are referred to as the Enterprises’

retained portfolios. In addition to credit risk, the

retained portfolios expose the Enterprises to

prepayment risk.

The net effect of adding origination fees to the new loan’s balance is negligible. In the case of default, the

Enterprises will be exposed to greater credit losses. However, if the borrower does not default, the loan is more

valuable because of the greater loan balance.

Prepayment risk refers to

the risk that the underlying

mortgage will be paid off early

resulting in less interest income

for the holder of the debt.

OIG  EVL–2013–006  August 1, 2013 23

The Enterprises’ retained portfolios include HARP-eligible mortgages. When these mortgages

are refinanced (i.e., prepaid), the Enterprises no longer receive the interest payments on the

original loan. Then, the Enterprises purchase or guarantee the new loan that is issued at a

lower interest rate than the original loan and, thus, is less valuable. The effective cost to the

Enterprises is the difference in value that is derived from the net interest rate spread between

the original loans and the new loans.

Representation and Warranty Relief Cost

As noted above, lenders provide certain representations and warranties regarding the integrity

of loans when they sell them to the Enterprises. If Fannie Mae or Freddie Mac discovers that

a lender has breached any of these representations or warranties, it can request the lender to

repurchase the loan. Over the previous two years, the Enterprises have received a significant

amount of money from lenders repurchasing defective loans that were sold to the Enterprises

prior to 2009.

To encourage lenders to participate in HARP, FHFA directed the Enterprises to waive

significant representation and warranty protection for all HARP refinances.

Therefore, if the

Enterprises do not identify a defect in the original loan prior to the HARP refinance, they will

likely be unable to pursue a repurchase.

In this situation, the Enterprises retain the loan’s

credit risk, which would otherwise be returned to the original lender. Consequently,

representation and warranty relief associated with HARP may negatively impact the

Enterprises financially. In its 2012 public filings, Freddie Mac raised this concern.

HARP-eligible loans, however, are seasoned loans made to borrowers who have demonstrated

their ability and commitment to repay their mortgages.

Typically, the Enterprises detect

a loan’s representation and warranty defects within the first three years of its delivery.

Therefore, the actual cost of eliminating the representations and warranties on HARP-eligible

loans is mitigated by their loan characteristics.

For example, in January 2013, Bank of America paid Fannie Mae $3.6 billion and repurchased $6.6 billion

of loans to settle outstanding repurchase requests for loans originated from 2000 to 2008.

As discussed above, both same servicers and new lenders are relieved of representations and warranties for

the original mortgage and the new HARP mortgage if certain criteria are met. Note that lenders are not relieved

of representations and warranties related to the Enterprises’ charters; misstatements, misrepresentations,

omissions, or data inaccuracies; clear title and enforceable first lien position; compliance with applicable laws;

and salability of the mortgage to the Enterprise.

If a borrower becomes more than 30 days delinquent within the first 12 months of an Enterprise acquiring

the refinanced loan, that Enterprise has the right to pursue all of the representations and warranties for the

HARP loan.

To qualify for HARP, the borrower must be current on the mortgage at the time of the refinance, with no late

payment in the past 6 months and no more than 1 late payment in the past 12 months.

OIG  EVL–2013–006  August 1, 2013 24

Opportunity Cost

If HARP did not exist, it is conceivable that some HARP-eligible borrowers would

conventionally refinance their loans. In this scenario, the borrower would have to acquire

additional mortgage insurance or add a sufficient amount of equity for the loan to be

Enterprise-eligible.

This would reduce the Enterprises’ exposure to credit losses from a

borrower default. Additionally, it is conceivable that the new loan would not be purchased or

guaranteed by the Enterprises, thereby relieving them of all credit risk formerly associated

with that loan.

With HARP, however, there is no need for HARP-eligible borrowers to acquire additional

mortgage insurance or add equity. Moreover, all HARP refinances are subsequently

purchased or guaranteed by the Enterprises. Thus, because HARP exists, the Enterprises

forego the opportunity to (1) reduce their credit risk through additional borrower credit

enhancements, or (2) relieve themselves of the loan entirely.

3. Remaining Barriers

Despite the modifications that FHFA has instituted throughout HARP, OIG has identified

several remaining program barriers.

Borrower Challenges

Borrower Knowledge

OIG found that borrower knowledge and understanding of HARP remains a critical barrier to

the program. This is because many borrowers have not heard of the program, confuse the

program with other government housing programs, or do not realize that they are eligible.

Under HARP 1.0, borrowers were rejected by lenders for various reasons that contribute to

today’s confusion. Lenders turned borrowers away because of credit and process overlays and

capacity constraints.

This left many borrowers frustrated or under the mistaken impression

that they were ineligible for HARP. Additionally, borrowers may not be aware that they are

permitted to refinance their mortgages with any participating lender.

The Enterprises’ charters generally prohibit them from purchasing first lien single-family mortgages if the

LTV is greater than 80% unless there is some type of credit enhancement, such as mortgage insurance.

It is the lender’s prerogative to establish credit and process overlays. Thus, if HARP-eligible borrowers are

turned down by one lender due to an eligibility overlay, then those borrowers may think that they are not

HARP eligible.

OIG  EVL–2013–006  August 1, 2013 25

As a result of the changes to HARP implemented throughout 2011, 2012, and 2013, lenders

have largely removed their credit and process overlays and increased their capacity. However,

the challenge of educating borrowers about HARP eligibility and lender options remains,

especially for reaching borrowers who previously tried to refinance under HARP 1.0 and were

denied.

FHFA and the Enterprises have acknowledged that borrower outreach is critical to increasing

HARP refinances. Prior to HARP 2.0, lenders were prohibited from directly soliciting

borrowers with HARP-eligible loans for refinancing. To improve borrower knowledge of

the program and encourage borrowers to refinance, FHFA and the Enterprises revised the

solicitation guidelines for HARP loans. Lenders are now generally permitted to actively

contact HARP-eligible borrowers and have been aggressively sending HARP solicitations to

them.

Despite lenders’ solicitation efforts, some HARP-eligible borrowers do not respond to

solicitations because they are not familiar with the lender or believe their underwater loan

does not qualify for HARP. To address this issue, lenders are permitted to co-brand

solicitation materials with the Enterprises’ names and a lender’s name to strengthen lender

credibility among borrowers. Fannie Mae has also been designing solicitation templates and

marketing materials for lenders to send to HARP-eligible borrowers. In addition to informing

borrowers that they may potentially be eligible for a HARP refinance, the materials provide

illustrations of the benefits of HARP. For example, the materials illustrate that one of the

potential benefits is a reduction in borrowers’ monthly principal and interest payments. Also,

the Enterprises have continued to add and update HARP content on their websites with

information specifically targeted at informing borrowers about HARP. This includes

answering basic questions about HARP, providing eligibility criteria, and listing participating

lenders. As of the date of this assessment, more than 250 servicers and lenders are

participating in HARP.

Through conversations with lenders and borrower outreach, the Enterprises found that there is

a subset of borrowers who are eligible for HARP, but are not interested in refinancing despite

the potential benefits. In an effort to encourage these borrowers to apply, the Enterprises

authorized lenders to offer incentives to borrowers who refinance under HARP. At their

discretion, lenders are now permitted to make a contribution to the borrower of up to $2,000

to reduce the HARP-refinanced loan’s unpaid principal balance. Additionally, lenders may

offer a $500 cash equivalent, such as a gift card, to borrowers during the HARP refinance

process.

The Enterprises do not reimburse lenders for either borrower incentive.

The lender cannot require the borrower to repay either amount. Additionally, the lender must disclose the

contribution in the HUD-1 form as a lender credit.

OIG  EVL–2013–006  August 1, 2013 26

Origination Fees and Closing Costs

As noted above, HARP refinances have origination fees and closing costs like other mortgage

transactions. This includes costs for the application, processing, appraisal, title search, and

other necessary items to complete the refinance.

OIG found that these upfront fees may be a

deterrent for potential borrowers. FHFA and the Enterprises are aware of this issue, have

taken steps to mitigate it, and offer alternatives for borrowers with limited capital.

In October 2011, FHFA modified two components of HARP to alleviate the borrower’s

burden. FHFA directed the Enterprises to (1) limit risk-based fees and (2) expand the use of

automated valuation models. Both of these changes reduce closing costs.

Additionally, a borrower has the option to borrow closing costs as part of the refinance. This

approach, however, increases the borrower’s unpaid principal balance and reduces the

borrower’s equity. As noted above, Fannie Mae currently permits all origination fees and

closing costs to be added to the loan balance. Freddie Mac, however, limits the amount of

refinance proceeds that can be added to the loan balance to the lesser of $5,000 or 4% of the

unpaid principal balance.

To support its position, Freddie Mac contends that HARP is a

program designed to help borrowers build equity in their homes. By limiting the increase in

the borrower’s unpaid principal balance, Freddie Mac is managing the credit risk associated

with the new loan. Moreover, a borrower has the option to finance the closing costs through a

higher interest rate.

Mortgage Insurance

HARP has special requirements for mortgage insurance that are intended to make it easier for

borrowers with high-LTV loans to refinance. Loans that do not have mortgage insurance

coverage at the time of refinancing are not required to obtain mortgage insurance. Loans that

do have mortgage insurance, however, are required to retain mortgage insurance coverage at

the same coverage level for the newly refinanced HARP loan. This applies to both borrower

paid mortgage insurance and lender paid mortgage insurance (LPMI).

On average, closing costs amount to 3% to 6% of the unpaid principal balance being refinanced.

Several mortgage insurance companies have also implemented caps on the amount of costs and fees that can

be added to the unpaid principal balance of the HARP loan.

LPMI is a type of mortgage insurance policy that is taken out by the lender at the time the loan is originated

and is attached for the life of the loan. The policy allows the lender to collect a higher interest payment from

the borrower and to forward the excess interest to the mortgage insurance company to pay for the mortgage

insurance.

OIG  EVL–2013–006  August 1, 2013 27

Under HARP 1.0, borrowers who had loans with mortgage insurance had difficulty

refinancing because the transfer of the mortgage insurance to the refinanced loan was

cumbersome for the same servicer, new lender, and the mortgage insurer. Same servicers

generally viewed loans with mortgage insurance as a “hassle factor” that disrupted the

streamlined refinance process. New lenders found it difficult to refinance loans with mortgage

insurance because it was problematic for the servicer of the old loan and the lender of the new

loan to coordinate transfer of the mortgage insurance policy. Therefore, some servicers and

lenders declined to refinance loans with mortgage insurance.

OIG found that since the implementation of HARP 2.0 the transfer of mortgage insurance has

become considerably less cumbersome. As a result, the majority of mortgage insurance

companies voluntarily agreed to make the mortgage insurance policies fully transferable to

new HARP loans.

However, OIG found anecdotal evidence indicating that borrowers with LPMI face barriers to

refinancing under HARP. Although both Enterprises permit loans with LPMI to be refinanced

under HARP, the complicated nature of this type of insurance may make it difficult for

lenders to transfer. The Enterprises have tried to address this by permitting the borrower to

obtain either LPMI or borrower paid mortgage insurance for the new HARP loan. Ultimately,

it is up to the lenders to decide whether they will refinance loans with LPMI.

Lender Challenges

Prior to the announcement of HARP 2.0, lenders informed FHFA and the Enterprises that

they were hesitant to invest in systems and personnel for HARP because of the program’s

short duration. This resulted in lender capacity constraints – lenders were unable to handle the

volume of borrowers seeking HARP refinances.

In October 2011, FHFA addressed this issue by extending HARP through 2013. By extending

the program, FHFA created an additional incentive for lenders to invest in employees and

systems to process HARP refinances. Then, in April 2013, lenders were given greater impetus

to increase capacity for HARP refinancing when FHFA extended the program through 2015.

As a result of the program extensions and increased borrower demand, lenders are devoting

more resources and personnel to handle the HARP refinance volume. However, OIG found

anecdotal evidence that lenders continue to experience capacity constraints causing some

HARP-eligible borrowers to wait up to 60 days or more for a refinance.

To manage their capacity, lenders try to use their resources as efficiently as possible. Lenders

are more likely to refinance loans for current customers before accepting HARP applications

from new borrowers who are not current customers. Several major lenders, however, have

begun to deplete their HARP-eligible portfolios and are starting to target other HARP-eligible

OIG  EVL–2013–006  August 1, 2013 28

borrowers outside of their servicing portfolio. Moreover, a number of lenders have begun to

participate in HARP, which helps alleviate capacity constraints, increase competition, and

provide borrowers with a greater selection of lenders.

4. The Future

Helping underwater borrowers refinance their mortgages remains a frequent topic of public

discourse. HARP 3.0 generally refers to further modification of HARP through proposed

legislative action. For example, the Responsible Homeowner Refinancing Act of 2013 is

pending HARP-related congressional legislation.

While this proposal seeks to codify most

of today’s HARP 2.0 guidelines, it contains several deviations. For example, the proposal

removes the minimum LTV eligibility requirement. Thus, if enacted, it would expand HARP

to include borrowers with LTVs less than 80%. Other stakeholders have suggested that

Congress should expand HARP to include loans that are not currently owned or guaranteed by

either of the Enterprises. Again, this would further broaden the HARP-eligible population.

Analysis of potential legislation, however, is beyond the scope of this report.

S. 249, 113th Cong. (2013); H.R. 736, 113th Cong. (2013).

OIG  EVL–2013–006  August 1, 2013 29

CONCLUSION ............................................................................

As a result of the HARP 2.0 modifications, HARP refinance volume increased substantially –

particularly for loans with LTVs greater than 105%. As of March 2013, there have been more

than 2.4 million HARP refinances. Additionally, HARP refinances are currently being

originated by more than 250 participating lenders. FHFA’s active administration of HARP

and its engagement of stakeholders have contributed to these outcomes. However, with over

two years left in the program, it is difficult to project how many HARP-eligible loans

ultimately will be refinanced because, among other factors, educating borrowers and

encouraging their participation continue to be major challenges.

OIG  EVL–2013–006  August 1, 2013 30

OBJECTIVE, SCOPE, AND METHODOLOGY .................................

OIG consulted a variety of public and nonpublic sources for this evaluation including:

 FHFA directives, documents, emails, reports, and press releases;

 Enterprise documents, servicer announcements, and press releases;

 Data published or provided by FHFA and the Enterprises;

 FHFA’s and the Enterprises’ websites;

 Borrower complaints made to OIG, FHFA, and the Consumer Sentinel Network;

 Congressional testimony and speeches of FHFA employees;

 Interviews with FHFA and Enterprise employees; and

 Industry publications.

OIG analyzed these sources by:

 Examining the purpose of HARP and what FHFA and the Enterprises are doing to

help HARP achieve its purpose;

 Identifying and gathering data on outputs and outcomes of HARP;

 Analyzing impacts of external factors on HARP that neither FHFA nor the Enterprises

can control such as interest rates, participation by lenders and mortgage insurers, and

borrower interest in refinancing; and

 Reviewing the Government Performance and Results Modernization Act of 2010,

which establishes federal planning standards.

This program evaluation was designed to evaluate HARP using the Enterprises’ current

definition of a HARP-eligible borrower. It does not evaluate the program as it existed prior to

HARP 2.0, nor does it evaluate potential future program changes, such as further broadening

or narrowing today’s eligibility parameters.

This evaluation was conducted under the authority of the Inspector General Act, as amended,

and is in accordance with the Quality Standards for Inspection and Evaluation (January

The Federal Trade Commission’s Consumer Sentinel Network is a database of consumer complaints

collected from federal, state, and local law enforcement agencies.

For example, the establishment of timelines and benchmarks is critical to assess progress in implementing

plans and is consistent with Government Performance and Results Modernization Act planning requirements.

OIG  EVL–2013–006  August 1, 2013 31

2012), which was promulgated by the Council of the Inspectors General on Integrity and

Efficiency. These standards require OIG to plan and perform an evaluation that obtains

evidence sufficient to provide reasonable bases to support this program assessment. OIG

believes that this report meets these standards.

The performance period for this evaluation was from February 2012 to June 2013.

OIG  EVL–2013–006  August 1, 2013 32

ADDITIONAL INFORMATION AND COPIES .................................

For additional copies of this report:

 Call: 202-730-0880

 Fax: 202-318-0239

 Visit: www.fhfaoig.gov

To report potential fraud, waste, abuse, mismanagement, or any other kind of criminal or

noncriminal misconduct relative to FHFA’s programs or operations:

 Visit: www.fhfaoig.gov/ReportFraud

 Call: 800-793-7724

 Fax: 202-318-0358

 Write to us at:

FHFA Office of Inspector General

Attn: Office of Investigation – Hotline

400 Seventh Street, S.W.

Washington, DC 20024