Studies Find Housing Counseling as an Effective Tool in Foreclosure Prevention
The Homeownership Preservation Foundation (HPF), an independent national non-profit dedicated to helping distressed homeowners navigate financial challenges and avoid mortgage foreclosure since 2004, has reported that independent data presented at a recent regulatory briefing verified the effectiveness of mortgage counseling for financially challenged homeowners who receive it.
The four research studies separately conducted by the Joint Center for Housing Studies of Harvard University, The Urban Institute, Federal Reserve Board (FRB), and the National Council on Aging (NCOA) were presented at a briefing session held June 21 by the Coalition of HUD Housing Counseling Intermediaries. Colleen Hernandez, president and chief executive officer of The Homeownership Preservation Foundation, which offers mortgage counseling via the Homeowner’s HOPE Hotline at 888-995-HOPE, moderated the panel during which the four organizations reported their findings.
Among the data presented that makes a compelling case for continued support of mortgage counseling opportunities:
►Housing counseling consistently increases the likelihood that the homeowner will be granted a loan modification (200 percent higher probability)
►Counseled borrowers received more favorable terms on their loan modifications compared to uncounseled borrowers (on average, $110 lower monthly payment and five basis points lower interest rate)
►Counseling raises the probability of a homeowner receiving a loan modification that "cures" (restores the loan to good standing) a serious delinquency or foreclosure (over a 12 month period, 55 percent of loans cured among people who received counseling versus 38 percent of loans cured among those who did not receive counseling)
►Homeowners who received counseling prior to being granted a loan modification curing a serious delinquency or foreclosure were more likely to remain current on their loan after the modification compared to those who did not receive counseling (64 percent versus 51 percent of loans were still current eight months post-modification for counseled and uncounseled homeowners, respectively)
►Increasing affordability problems suggest greater need for counseling as the number of renters and current homeowners paying more than 50 percent of their income on housing continues to grow
HECM counseling is a critical consumer protection service for senior citizens who, facing financial insecurity due to stock market volatility, low returns on investments, and rising longevity may consider reverse mortgages to address budget shortfalls. HUD budget cuts have shifted the cost of mandatory pre-loan HECM counseling to senior citizens at a time they may not be able to afford it (35 percent carry a mortgage in 2009 versus 24 percent in 1999, and more than 40 percent of seniors currently live more than 200 percent below poverty level)
"As nearly three-quarters of those who call our national Homeowner's HOPE Hotline and receive foreclosure prevention assistance from our counselors report back that they are still in their homes a year later, the findings presented by these four well-respected organizations corroborate what everyone at HPF knows firsthand that mortgage counseling works," said Hernandez.
Housing counselors employed by HUD-approved agencies are trained to help financially distressed homeowners examine their financial health, create responsible budgets that will alleviate debt, and, where possible, identify options that will enable the homeowner to prevent foreclosure and bring their mortgage back to good standing. Many, including those affiliated with The Homeownership Preservation Foundation, also provide critical information to help homeowners avoid being victimized by mortgage scams, all at no cost to the consumer.
"The research presented at this briefing provides unbiased support of the favorable impact that housing counseling has had during this economic crisis," said Hernandez. "Alarmingly, the continued availability of these much-needed services is in jeopardy due to recent federal government budget cuts that removed $88 million for housing counseling programs. We must restore this critical funding to ensure that financially distressed homeowners who desperately need reliable, accurate financial guidance can get it."
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