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Report Shows That Counseling Assists Homeowners Facing Foreclosures

Monday, December 14, 2009

Report Shows That Counseling Assists Homeowners Facing Foreclosures

DISB encourages residents to get the help they need before it’s too late.

(Washington, DC) — Reiterating a frequent statement by the DC Department of Insurance, Securities and Banking (DISB), a recent report done by the Urban Institute, a nonprofit, concluded that homeowners in a federal foreclosure counseling program somewhat reduced the likelihood that their homes would end up in foreclosure.

The report on the National Foreclosure Mitigation Counseling (NFMC) program estimated that during its first year, counseled homeowners were almost twice as likely to get out of foreclosure, and avoid a foreclosure completion, than they would have been had they not received NFMC counseling. Loan modifications received by NFMC clients resulted in much lower mortgage payments than what they would have received without the help of the program. Lower monthly payments tend to reduce the chances of a subsequent recurrence of borrower mortgage problems. On average, the study estimated that NFMC clients who received loan modifications reduced their monthly payments by $454 more than they would have without such counseling.

“This is encouraging news,” said DISB Commissioner Gennet Purcell, “especially since the start of this crisis, DISB has worked with several District housing counselors, forwarding referrals, co-hosting foreclosure prevention seminars and making available the agency’s Foreclosure Mitigation Kit. There have been instances, too, where DISB has intervened with lenders to help keep homeowners in their homes.”

The NFMC program is a special federal appropriation, administered by NeighborWorks® America, which is designed to support a rapid expansion of foreclosure intervention counseling in response to the nationwide foreclosure crisis.

It was estimated that the program assisted about 880 clients avoid going into foreclosure through December 2008. That is, the number of homeowners who were moderately delinquent (two or three months) and experienced a foreclosure would have been almost 5,000 compared to the almost 4,100 actual foreclosures estimated. By helping to avoid these foreclosures, the NFMC program created potential cost-savings of $33 million between January and December 2008.

According to one of the report’s authors, although the findings are preliminary (based only on the first program year), and may not be applicable to counseling outside the NFMC program, the Urban Institute found strong results suggesting that counseling does help homeowners facing foreclosure, particularly in avoiding a foreclosure sale and in obtaining a better loan modification. The program had its intended effect of helping homeowners facing loss of their homes through foreclosures.

Commissioner Purcell—who is a member of an Interagency Foreclosure Alliance Working Group made up of District government agencies including the Department of Housing and Community Development, and local nonprofits—added that counseling programs such as the NFMC are effective in helping homeowners avoid and cure existing foreclosures. She encourages residents who may have received foreclosure notices, or who may be having problems paying their mortgages, to call DISB at (202) 727-8000.

A copy of the full Urban Institute report is here.