Is HARP finally plucking all the right strings?

If so, then why are so few borrower's dancing to the tune?

A Federal Housing Finance Agency report released Friday shows there were 180,000 refinancings completed under the Home Affordable Refinance Program (HARP) in the first quarter of 2012, up from roughly half that number the prior quarter. The agency attributed the increase to the removal of HARP's prior 125% Loan-To-Value cap, which allows severely underwater borrowers to take advantage of today's low interest rates. And it didn't hurt that the program also eliminated or reduced certain loan fees.

Despite this joyful noise, its not clear everyone is hearing the music. The real estate marketing company Zillow estimates there are 15.7 million US mortgages underwater.  It would seem many more borrowers should be trying to take advantage of HARP to lower their monthly payments.

Part of the problem might be borrower education (or lack thereof).

To address this knowledge gap and in the process improve the chances they will retain their credit worthy borrowers (who just happened to buy a house at the wrong time), lenders should consider undertaking an outreach campaign to promote HARP.

Bank of Oklahoma did just that and were pleasantly surprised with the results. Working from a list of 12,000 high loan-to-value accounts, the bank reached 4,000 of their borrowers with an interactive voice message and qualified interest in a HARP refinance with over 1,500 of them. Susan Millspaugh, SVP of Marketing and Mortgage Production, summed up the results this way:

"In the past we’ve relied on direct mail to promote offers to our borrower base and were happy with a 2% response rate. Using the interactive voice message, we got five times that response and our program cost was less than one-third what it would have been using direct mail."

Is HARP the answer for every underwater loan at high risk of default? No, it only applies to loans guaranteed or owned by Fannie Mae and Freddie Mac, and the borrower must be current in their payments to qualify. But for those that can benefit from the program, HARP can help turn them away from a strategic default and keep them in their home.

But this will only happen if they are invited to the dance.

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4. Mortgage Delinquencies Down Slightly, But Remain Near Historic Highs
5. Mortgage Collections Stuck in Neutral