be. That is, if HARP is not extended by March 12, lenders will be unable to give 90-
day HARP rate locks, and if the program is not extended by April 11, lenders will no
longer be able to give even 60-day HARP rate locks.

Conciusion

To keep creditworthy, performing borrowers in their homes and out of unnecessary
foreclosure, to maintain neighborhoods and home prices, and to protect Fannie Mae,
Freddie Mac, and taxpayers from unnecessary losses, we urge that HARP be extended
for one year, without delay, until house prices rebound.

Sincerely,

American Bankers Association
American Financial Services Association
Consumer Mortgage Coalition

Housing Policy Council

Mortgage Bankers Association

cc:

Michael J. Williams, President and Chief Executive Officer, Fannie Mae
Mr. Charles E. Haldeman, Jr., President and Chief Executive Officer, Freddie Mac



HARP Refinance, Monthly Volume
‘Biiendir of eae 0 thoveneds)

Percent of
Total 0% 14% SHH 12% 90% BO BSH 9.8% 11.6%

[As this illustrates, HARP is a very substantial portion of the refinance market. Letting
it sunset would be disruptive and detrimental.

HARP Remains Critical

Annual home prices in 2009 saw a record rate of decline, and prices remain depressed?
Nearly 10.7 million families, or 23 percent of homeowners with mortgages, had
negative equity in the third quarter of 2009, and another 2.3 million had equity of less
than 5%.’ That means 13 million mortgage loans have 5% or less equity, putting an
enormous number of borrowers in the difficult position of having to decide what to do
with an underwater loan.

For those whose loan is underwater, HARP is the only viable option. Until home prices
rebound and remain elevated, HARP will remain the only viable option.

HARP Extension Timing Can Avoid Market Disruptions

It is important to note that the HARP program needs to be extended significantly in
advance of its sunset date to prevent disruptions in this critical program and to prevent
unnecessary foreclosures.

Borrowers need “rate locks” as their refinance applications are processed, so that
borrowers can be certain what the rate and payments will be on the new loan. Rate
locks are for a predetermined period of time, such as 90 days or 60 days. The closer we
get to June 10 without a HARP extension, the shorter the HARP rate locks will need to

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| Submit | [2 Prinefome

1
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REGISTERED LOBBYIST CONTACT DISCLOSURE FORM

This form is to be completed by Executive Branch employees who are contacted by registered lobbyists regarding
EESA.” report includes a written description of each contact, the date and time of the contact, and the names
of the registered lobbyist(s) and the employee(s) with whom the contact took place. Written materials prepared

by registered lobbyists should be attached to this form for posting on the website. The information on this form will

be available to the public on Treasury's website.

To be completed by the employee contacted

Name of the , - ee
i Brief description of the communication:
’ ;
Date and time of contact ee ae {attach separate sheet if necessary)

February 18, 2010

Secretary Geithner

See Attached

Association, American
Financial Services
Association, Consumer
Mortgage Coalition.
Housing Policy Council,
Mortgage Bankers
Association

Association, American
Financial Services
Association, Consumer
Mortgage Coalition,
Housing Policy Council,
Mortgage Bankers
Association

Name of the Employee(s) who prepared this form: Date
Registered Lobbyist Name: Title: Firm or Organization:, if Client
applicable
American Bankers American Bankers Self



2010-SE-000599

February 18, 2010

American Bankers Association
American Financial Services Association
Consumer Mortgage Coalition
Housing Policy Council
Mortgage Bankers Association

The Honorable Timothy F. Geithner
Secretary of the Treasury Department
1500 Pennsylvania Avenue, NW
Washington, D.C, 20220

Mr. Edward DeMarco

Acting Director

Federal Housing Finance Agency
1700 G Street, NW

Washington, D.C. 20552

Re: Critical Need for HARP Extension
Dear Secretary Geithner and Acting Director DeMarco:

The Home Affordable Refinance Program (HARP) permits homeowners who are
current on their mortgage foans to refinance even though their home values have
dropped. This helps responsible, performing borrowers receive the benefit of today’s
low mortgage rates and avoid unnecessary foreclosure. Authority under HARP is
scheduled to sunset for loans closed after June 10, 2010.!

HARP is just as critical today as it was last year when it was introduced. In its first
months of operation, HARP has become a significant contributor to the refinance

market. We urge that HARP be extended before March 10th, in time to avoid market
disruptions.

* The loan must be dated before June 10. For Fannie Mae loans, the loan must be delivered to Fannie
Mae by October 1, 2010, and for Freddie Mac loans, the loan must be delivered within 120 days of the
note date.



How HARP Solves A Problem

‘When home values decline, refinancing often becomes difficult even for creditworthy
borrowers who are able to make loan payments. Fannie Mae and Freddie Mac
generally require down payments of 20% of the loan amount. Borrowers who do not
have 20% down may purchase mortgage insurance and qualify for a Fannie Mae or
Freddie Mac loan under a variety of programs. Recently, however, as home prices
declined, mortgage insurers have been less likely to insure a mortgage loan, leaving
many borrowers, particularly those with high loan-to-value (LTV) ratios, no options to
jower their payments by refinancing and taking advantage of the current low rate
environment.

HARP is designed for just this situation. it allows current borrowers to refinance loans
owned by Fannie Mae or Freddie Mac with LTVs up to 125%. This helps avoid
unnecessary foreclosures and helps keep families in their homes by improving mortgage
affordability.

Ifa borrower is unable to take advantage of lower mortgage rates and refinance when
the home value declines, the borrower may be forced into involuntarily ~ and
‘unnecessary — foreclosure or, in some cases, may calculate that walking away from the
Joan is financially better than continuing to make above-market payments on an
‘underwater loan.

In this situation, HARP makes it easier for families to stay in their homes, Because
HARP avoids unnecessary foreclosures, it helps maintain the quality of neighborhoods
and helps maintain home prices. A refinance is better for Fannie Mae, Freddie Mac,
and the taxpayers because the loan continues te produce cash flows that, while slightly
reduced, are more likely to exceed the value of foreclosing on homes. HARP also
appropriately rewards borrowers who have worked hard to stay current on their
mortgage loans and who continue to demonstrate @ responsible use of credit.

HARP Has Proven To Be Successful Even Though It is Relatively New

For families with mortgage loans greater than their home values, HARP is the only
feasible option. Because of this, HARP has been immediately successful even though it
is still ramping up and not at its full potential. Indeed, 190,000 loans have been
refinanced under HARP so far, even though it has been operational for less than a year.
The program began in April and was underway by June. It began with a loan-to-value
(LTV) ratio limit of 105%, later increased to 125%. Fannie Mae began accepting loans
with an LTV of up to 125% on September 1, and Freddie Mac did so on October 1. The

Federal Housing Finance Agency (FHPA) reports that HARP refinance performance as
follows on the next page:”

2 See hitp:/www. fhfa cov/webfiles/1$389/Foreclosure Prev release _}_29_10.pdf at page 4.