Foreclosures are Down but Still Existent
The number of foreclosure filings has decreased in many areas in the country. Even still, foreclosures are still occuring. Some mortgage lenders may have held off on the filing of a foreclosure so now they seem to be taking more action to begin the foreclosure process with homeowners.
The good news is many of those filings actually will never become a full blown foreclosure, with the homeowner losing the home to the legal foreclosure sale of the home. Despite news reports, homeowners do often find solutions to resolve their mortgage delinquency issues before the house gets sold at a foreclosure auction. Getting advice about your options is critical to making the best decision that you can for your circumstances.
Foreclosures are complicated and the options to avoid them are equally complicated. Homeowners have many options that they might be able to take advantage of. Some include: catching up the payments, refinancing the loan if not yet behind on payments, modifying the original terms of the loan, selling or short selling the home, asking the lender to take a deed in lieu of foreclosure, or moving and renting the property until they can better afford the payment. Each of these choices has their own set of necessary steps to take and consequences to consider.
Study Shows Positive Effect of Counseling to Prevent Foreclosure
Evidenced by a study of the National Foreclosure Mitigation Counseling (NFMC) program, there is a strong indication that homeowners who seek out a US Department of Housing & Urban Development (HUD)-certified housing counseling agency to provide them guidance were much more successful in avoiding foreclosure.
The Urban Institute completed its evaluation of Rounds 1 and 2 of the National Foreclosure Mitigation Counseling (NFMC) program. The final report demonstrated significant positive effects for NFMC participants: counseled homeowners were more likely to receive better loan modifications, cure a serious delinquency or foreclosure and stay current, and avoid a foreclosure completion altogether.
- Counseling greatly increased the ability of homeowners to stay current once they cured a serious delinquency or foreclosure. Counseled homeowners were at least 67% more likely to remain current on their mortgage nine months after receiving a loan modification cure. A small part of this effect is attributable to the impact of counseling on the size of monthly payment reductions. However, a significant part is attributable to other positive impacts of counseling, such as helping homeowners improve their financial management skills and assisting them in managing relationships with servicers.
- NFMC counseling made it more likely that homeowners would receive a modification cure in the first place nearly doubling the odds of modification cures for counseled homeowners compared to non-counseled ones. The Home Affordable Modification Program(HAMP), which is a government program, to encourage modifications amplified this positive effect. In the period before HAMP, 8% of homeowners receiving counseling assistance had modification cures, compared to 5% who did not receive counseling. Post-HAMP, 17% of homeowners receiving counseling assistance had modification cures, compared to 9% without.
- Counseled homeowners received loan modifications resulting in a monthly payment that was, on average, $176 less than non-counseled borrowers. This is a savings of close to $2,100 a year.
Overall, the Urban Institute evaluation demonstrated that the NFMC program helped many homeowners facing loss of their homes through foreclosure. The positive effects demonstrated in the final report are strong and are consistent with those found in prior analyses of Rounds 1 and 2.
Find a HUD Approved Housing Counselor
To find a HUD approved housing counseling agency in your area, go to nfcc.org/locator and choose Foreclosure Prevention from the dropdown menu. Our member agencies have HUD approved housing counselors available to help homeowners evaluate their options. A number of for-profit providers often charge high up-front fees and these should be avoided. Getting help may feel overwhelming, but the study above proves it may be the only way to go so that you can know all of your options.
About the Author: Sara Gilbert is the Strategic Partnerships Liaison at GreenPath Financial Wellness; a member of the National Foundation for Credit Counseling.