Keys to Preserving Homeownership through Housing Counseling

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1 Keys to Preserving Homeownership through Housing Counseling NeighborWorks Week 2015: Empowering Neighborhood Leaders! June 6, 2015 St. Luke's Episcopal Church

2 Overview According to a Minneapolis Study by The Center for Housing Policy, entitled The Role of Housing Counseling in Reducing Mortgage Delinquency and Foreclosure1 there is strong evidence that housing counseling can be an effective intervention in helping distressed homeowners avoid foreclosure.

3 Overview - Findings Specifically: A nationwide study of the foreclosure mitigation counseling program found that borrowers who had missed a payment on their mortgage were 45 to 50 percent more likely to get up-to-date on payments if they received counseling2. Homeowners in default who received counseling were twice as likely to avoid foreclosure as those who did not in a study of the Mortgage Foreclosure Prevention Program3.

4 Overview - Findings Early intervention is a key component! One study found that borrowers who received counseling in the early stages of default were far more likely to receive a loan modification and/or keep their homes than those who received counseling when they were seriously delinquent4.

5 Overview - Findings Families who participated in the National Foreclosure Mitigation Counseling (NFMC) program were also able to negotiate lower monthly costs. An evaluation found that the monthly payments of households that received counseling were, on average, $267 less than those who did not participate in counseling5. Counseling also made it 45% more likely that the homeowner would sustain those payments after modification6.

6 Overview - Findings There is also evidence that counseling provided before a household purchases a home can reduce the likelihood of mortgage delinquency. Most studies have found that pre-purchase counseling leads to positive results, reducing delinquency anywhere from 19 to 50 percent, although one study reported no impact.7 Research in 2001 found that face-to-face counseling was most effective, resulting in a 34 percent reduction in delinquency for participating homeowners.8

7 Overview - Findings Pre-purchase counseling can help reduce the likelihood of default and foreclosure by helping individuals determine if they are ready for homeownership, and by connecting them with safer and more affordable mortgage products.

8 Overview - Findings One study has estimated that 30 to 50 percent of subprime borrowers prior to the housing crisis could have qualified for prime loans.9 Well-underwritten, prime loans to low- and moderateincome borrowers have much lower default rates than subprime loans made to comparable borrowers.10 Prepurchase housing counseling from a HUD-Approved Housing Counseling Agency can improve homeowners access to appropriate mortgage products.

9 Overview - Findings Additional & ongoing research is still being conducted to better understand the full impact of homeownership education and counseling. Researchers have employed a variety of methods to examine the effects of homeownership education and counseling but to date have not conducted an experimental trial. Research comparing outcomes for households randomly selected to receive pre-purchase homeownership counseling against control groups of households that do not receive counseling would make a significant contribution to the field.

10 Overview - Endnotes 1. Laura Williams is a Research Associate with the Center for Housing Policy. 2. A number of recent literature reviews explore the research base in greater depth. See generally: University of Wisconsin-Madison Weighing the Evidence of the Effectiveness of Counseling and Education for Home Owners. CFS Issue Brief, ; Collins, Michael J. and Collin O Rourke Homeownership Education and Counseling: Do we know what works? Research Institute for Housing America Special Report. Mortgage Bankers Association. 3. Mayer, Neil et al National Foreclosure Mitigation Counseling Program Evaluation: Preliminary Analysis of Program Effects. Washington, DC: The Urban Institute; Ding, Lei, Robert G. Quercia, and Janneke Ratcliffe Post-purchase Counseling and Default Resolutions among Low- and Moderate-Income Borrowers. Journal of Real Estate Research, 30(3): Quercia, Roberto and Spencer M. Cowan The Impacts of Community-based Foreclosure Prevention Programs. Housing Studies, 23(3): Collins, J. Michael and Maximilian Schmeiser Estimating the Effects of Foreclosure Counseling for Troubled Borrowers. Federal Deposit Insurance Corporation Center for Financial Research Working Paper; Mayer et al Mayer et al In contrast to the several studies that have found a correlation between pre-purchase counseling and lower delinquency rates, Quercia and Spader (2008) found no evidence of an impact on default rates. 8. Hirad, Abdighani and Peter M. Zorn A Little Knowledge is a Good Thing: Empirical Evidence of the Effectiveness of Pre-Purchase Homeownership Counseling.. 9. Reid, Carolina Preventing Foreclosure: Initiatives to Sustain Homeownership. Community Investments. Federal Reserve Bank of San Francisco. 10. Ding, Quercia, and Ratcliffe

11 The Role of Housing Counselors A HUD Approved housing counseling Agency with certified housing counselors is someone who can help clients through the process of working to save their home from foreclosure. (visit While counselors will do all that they can to assist clients, the process is a two-way street with the homeowner as a critical partner in the process.

12 The Housing Counselor Will Help determine the homeowner s objectives and needs Determine any time constraints Assist the homeowner in establishing reasons for default & help prepare a hardship letter Serve as a liaison between homeowner and servicer

13 The Housing Counselor Will Assist in preparing a spending plan Help consider ways to increase homeowner s income or available cash Assist the homeowner in reducing other debt

14 The Housing Counselor Will Ask the homeowner to set aside funds (if available) to prevent foreclosure Get exact totals on current payments, arrears, & loan balance Work with the homeowner to make realistic choices

15 The Housing Counselor Will Start paperwork if the homeowner chooses to try to save the home from foreclosure Work with the homeowner to request a delay of foreclosure sale date Assist the homeowner in determining appropriate options

16 Role of the Counselor Partnering for a Workable Solution Homeowner Lender/Servicer Counselor

17 Definition of Terms and Timeline

18 Definitions Collections: the process of contacting the homeowner for and receiving delinquent amounts which they are owed Delinquency: failing to make a timely payment so that it is received on or after the due date Foreclosure: legal action to force the sale of a home Investor: the owner of the loan

19 Definitions Insurer: insures the lender/investor in case the loan becomes delinquent Loss Mitigation: working with the customer to find a permanent solution to resolve the delinquency-homeownership Preservation Mortgage Servicer: responsible for customer service, processing payments and working with delinquent customers

20 Delinquency Cycle - GA Current on Due Date 30 Days 60 Days 90+ Days Refer to Foreclosure Days Collections Loss Mitigation Take Action Now! Call your Lender for assistance early! More options may be available when you ask for assistance early!

21 Loss Mitigation what are my options?

22 Repayment Plans Special Forbearance Plan Loan Modification Making Home Affordable Plan HAMP & HARP HomeSafe GA Retention Options

23 Repayment Plans Used to address a short term issue with the loan (short term loss of employment, loans that are delinquent by a few payments.) Customers are asked to make (for example) 1 ¼ payments, or 1 ½ payments per month to catch up. Does not require a permanent change to the mortgage documents.

24 Special Forbearance Plan A signed agreement Allows the reduction or suspension of a homeowner s monthly payments for a specific period of time Requires: Regular monthly payments plus additional amounts as agreed Payments continue until the loan is current

25 Loan Modification Permanent changes are made to your existing loan. For example: interest rate reduction, term extension, principal forbearance or reduction. Some servicers do a trial period, others do not. The changes in your mortgage payment and loan are based on income and expenses.

26 Making Home Affordable About MHA The Making Home Affordable Program (MHA) is an important part of the Obama Administration's comprehensive plan to stabilize the U.S. housing market by helping homeowners get mortgage relief and avoid foreclosure. To meet the various needs of homeowners across the country, Making Home Affordable programs offer a range of solutions that may be able to help you take action before it's too late.

27 Making Home Affordable HAMP Home Affordable Modification Program helps homeowners who are struggling to keep their loans current or who are already behind on their mortgage payments. By providing participating mortgage loan servicers with financial incentives to modify existing first lien mortgages.

28 Making Home Affordable HARP Home Affordable Refinance Program is designed to help homeowners get a new, more affordable, more stable mortgage, if not behind on their mortgage payments, but have been unable to get traditional refinancing because the home s value has declined and borrower has either a Fannie Mae or Freddie Mac. HARP refinance loans require a loan application and underwriting process, and refinance fees will apply.

29 Does Fannie or Freddie Own Your Loan? If your mortgage is owned by Fannie Mae or Freddie Mac, you may be eligible for a Home Affordable Refinance Program and take advantage of lower interest rates. Loan Lookup: FANNIE (8am to 8pm EST) FREDDIE (8am to 8pm EST)

30 HomeSafe GA Hardest Hit Program HomeSafe GA - In 2010, the Hardest Hit Fund was established by the federal government to provide foreclosure help to homeowners most affected by the steep decline in home prices and rising unemployment rates. HomeSafe Georgia was established by the Georgia Department of Community Affairs to administer the $339 million designated to Georgia, one of the 18 hardest hit states. - Funding for HomeSafe Georgia comes from the Treasury's Hardest Hit Fund.

31 Transition Options Full Sale Short Sale Deed in Lieu Foreclosure

32 Full Sale A sale of the property where the homeowner has enough equity to pay off all liens in full. For homeowners who can no longer afford their mortgage payments and have equity in their home.

33 Short Sale A sale of the property where the homeowner doesn t have enough equity to pay off all the liens on the property and the lender(s) has agreed to accept the net proceeds of the sale to satisfy the lien. The homeowner may face a deficiency judgment or be required to repay the deficiency to the lender.

34 Deed-in-Lieu of Foreclosure The lender must agree that the homeowner can voluntarily sign the deed over to the lender to avoid the foreclosure process. The Homeowner is required to vacate the property at the time the documents are signed or other negotiated date.

35 Foreclosure The lender sells the property to recover its loan balance when the homeowner is no longer able to make the payments. For those homeowners who can no longer afford their mortgage payments and no other option was available or successful.

36 Required Documentation Letter explaining your circumstances (hardship letter) Disclosure of financial information: Pay stubs Tax returns and W-2 forms Bank Statements Debts and obligations Assets 4506-T or 4506 TZ forms RMA (Request for Mortgage Assistance) *Other Documentation as requested

37 Resources Making Home Affordable U.S. Department of Housing and Urban Development Link with Local FREE Counseling HOPE NOW Alliance Homeowners HOPE Hotline (888) 995-HOPE (4673) NeighborWorks America

38 Tips to Protect Homeownership NeighborWorks America is working with national, state and local partners on the ground and more than 235 community-based affiliates. Together, the partners have alerted millions of homeowners in hundreds of at-risk communities through real-life scam stories; TV, radio and print advertising; online marketing; local transit and radio PSAs; earned media; fliers; postcards; door hangers; tip cards; posters; events; word of mouth; e- cards and social media activity. PLEASE CONTACT 1(888) HOPE

39 Tips to Protect Homeownership DO NOT panic Open your mail Talk to your lender/servicer Visit a HUD Approved Housing Counseling Agency Find out the rules in your state how much time do you have Never sign a contract under pressure Never sign away ownership of your property

40 Tips to Protect Homeownership Do not make payments to anyone other than your lender Beware of a home-sale contract where you are not formally released from your mortgage Do not sign anything with blank lines or spaces If you do not speak English, use your own translator or request bi-lingual services Beware of those offering to pay your arrearage and take the house off of your hands (equity stripping)

41 Take Action Now!!!!

42 The Homeowner s Responsibility We urge you to: Contact your lender as soon as possible Respond to communications from your lender Provide full, complete and truthful disclosure of your circumstances Contact a HUD Approved Counseling Agency Toll-free number is or

43 Take Action Get Involved Call your lender/servicer Work with a HUD-Approved Counseling Agency Ask what options may be available Work together to find a realistic, permanent solution. Remain hopeful, patient and persistent!

44 Contact us! D&E, A Financial Education and Training Institute, Inc. Patrice B. Duncan, Executive Vice President 4532 Jonesboro Road, 2 nd floor Forest Park, GA office fax

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