Imagine boarding a brand new, high-speed train from New York to Washington. A typical three-hour ride, reduced to a mere 105 minutes. To your surprise, however, you still arrive three hours later.

Why?  High-speed trains are useless without high-speed infrastructure. Substandard execution can mean the difference between high-speed relief and "low-speed" despair.

Now consider the many well-intentioned mortgage relief strategies, like the Home Affordable Refinancing Program, that have fallen short of market and borrower expectations – particularly for those homeowners who have the greatest need: extreme negative equity.

When Harp was launched in April 2009, the loan-to-value ratio was capped at 125%.  As a result, relief found its way to relatively few people. Harp 2.0 followed in early 2012 with a lot less fanfare, and a bit more success. Limited representations and warranty relief, speedier documentation requirements and an unlimited LTV helped pave the way for borrower assistance in greater overall numbers.

The true story behind this relief, however, may have more to do with historic low rates and large profit margins than program enhancements.

The mortgage servicers with the largest portfolios are executing a disproportionately low percentage of Harp refis on loans with LTV's greater than 120%. Most large servicers are inundated with calls from their high-LTV borrowers looking for Harp relief, causing long waits, dropped calls, denials and limited success.

A high percentage of borrowers who are told by their lenders that they do not qualify for a Harp do in fact qualify. Many are being denied due, in large part, to their lender's "credit overlays" and not because they fall outside of Harp guidelines. This has led many to simply give up without knowing they can seek Harp relief elsewhere.

My firm has collected some telling statistics in the process of running campaigns for various risk holders to encourage refi candidates in more than a dozen states to apply for a Harp refi. The population targeted by these campaigns had an average LTV of 164%. Only 8% of these consumers were pursuing a Harp refi, and another 8% said they planned to pursue one eventually. Nineteen percent had given up because the process was confusing or challenging; 23% were told that they did not qualify (83% of them actually did qualify); and 36% haven't bothered to look into a Harp, or didn't know what it is. (The aggregate size of the campaigns totaled approximately 50,000.)

While deeply underwater borrowers languish, lenders are reaping profits from the origination business like never before with margins that are two to five times greater than historical averages. Most large servicers, unfortunately, have very few resources allocated to sourcing high-LTV Harp candidates. This has resulted in keeping a lid on headcount while earning huge loan-level profits.

In the industry's defense, large banks are playing within stated guidelines. There are no rules related to which borrowers should (or should not) receive Harp assistance (though discrimination is carefully monitored). There are also no rules that govern exactly how restrictive a bank's credit overlays should be.

Banks and lenders are judged by the risks they take and the money they make for their shareholders, and not by the risk they eliminate on behalf of mortgage insurance providers and the government-sponsored enterprises. A lender makes the same profit whether HARPing an 85% LTV loan or a 250% LTV loan (all other things being equal).

While there is some value to "rep relief," and lower default frequencies, most banks will chose a path that provides immediate revenue versus greater risk reduction. The larger servicers seem to be focusing much of their available Harp efforts (proactive and reactive) on lower-LTV candidates. Simply put, the market value of a lower average LTV servicing portfolio is greater than that of a higher LTV portfolio. Some banks expect that, through attrition, the higher LTV borrowers will eventually keep paying or refinance elsewhere, while others banks will start with HARPing lower risk loans, and then redirect their efforts on the high risk borrower when needed.

The measure of overall Harp success should not be the total number of completed refis. The true measure of the success of any mortgage relief program should be the percentage of high risk borrowers who ultimately benefit.  

It's true that any borrower – regardless of LTV – who completes a Harp will benefit. However, successfully executing a Harp on a high-LTV borrower – over a low LTV borrower – creates a greater benefit to the community, the industry and the taxpayer – while preserving the same profit margin for the bank and their shareholders.

Frank T. Pallotta is a managing partner of Loan Value Group LLC in Rumson, N.J.