Since the onset of Great Recession and the subsequent housing crisis, hundreds of thousands of homeowners have lost their residences.
However, there were also thousands of other homeowners who were close to the desperate edge but managed to make it through those trying times because they were counseled by professionals who steered them past the economic shoals.
While it looks like the worst is over for homeowners, there’s still much trouble in paradise and organizations that do counseling have begun to pick up the pace.
In August, Fannie Mae announced it opened an extension of its Los Angeles Mortgage Help Center in the Inland Empire region to provide free education and counseling services to struggling California homeowners. Fannie Mae now has 12 Mortgage Help Centers around the country.
Meanwhile, earlier in the summer, the National Council of La Raza (NCLR) launched a telephone counseling program aimed at helping homeowners in six states who are facing foreclosure.
According to NCLR, residents of Arizona, Colorado, Michigan, Nevada, Utah and Washington will be able to call the new hotline to speak with housing counselors who will help them navigate through the options of applying for a loan modification, short sale or refinance, or submitting a claim of wrongful foreclosure.
All this activity seemed to me to be late in the game — after all, the housing market was lifting off the bottom in most cities across the country.
As it turned out, my assumptions were dead wrong.
"We are just halfway through the crisis," said Graciela Aponte, a senior legislative analyst with NCLR. "The first wave was huge and it was mostly about the homeowners who bought high-interest-rate loans or adjustable-rate loans. We’ve gone through that wave and now we are seeing a different wave, which is economic. Families where the breadwinners have lost their jobs or are only working part time, and their house is worth half of what they bought it for."
So, why the hotline? I asked.
"What we have seen in the last six to nine months are lower numbers coming into the counseling agencies, which is strange because there are a lot of new programs out there that we thought would bring an uptick in our clientele," Aponte said. "It is very confusing on the ground. We are trying to do a larger outreach effort."
All these extra efforts by Fannie Mae and NCLR are important because counseling works. Earlier this year, the results of two studies by the U.S. Department of Housing and Urban Development confirmed the positive impact counseling has on consumers in two distinct situations: buying a home and struggling to stay in a home.
- Through the Pre-Purchase Counseling Outcome Study, HUD found that 35 percent of participants became homeowners within 18 months of pre-purchase counseling.
- According to the Foreclosure Counseling Outcome Study, nearly 70 percent of those counseled by a HUD-certified counselor obtained a mortgage remedy. In addition, 56 percent found solutions in their defaulted loan and became current on their mortgages.
I checked in with Jo Kerstetter, the vice president of financial education and community relations for Money Management International in Washington, D.C., and asked about the HUD studies.
I figured Kerstetter would know a thing or two about counseling, as hers is a nonprofit organization approved by HUD to deliver a variety of housing counseling services: the Homeowner’s HOPE Hotline, first-time homebuyer workshops, and reverse mortgage counseling.
The most significant part of that study, the piece that everyone should take away, according to Kerstetter, "is that nearly 70 percent of the clients who sought counseling before they became delinquent were still in their homes and current on their mortgage at the 18-month follow-up period. The 30 percent who weren’t successful were six months behind at the time they entered the counseling."
To which she added, "That indicates the need for people to get counseling as soon as possible. If that happens, counseling works."
Counseling succeeds because the people who seek out help are extremely serious about their situation and really need to find a solution. They appreciate the assistance because the financial process to rectify a tough situation can be daunting. If a third-party walks them through the process, gives them support, assistance and knowledge, there’s a very good chance they’ll find a way out of their economic dilemma.
There are two things that happen in counseling. First, a counselor looks at the total family situation. Then the counselor helps the homeowner come up with a plan.
In addition, the homeowner is encouraged to contact the lender with the counselor as the backup.
Kerstetter explained, "What we try to do once we determine the client’s situation is intercede with the servicer and set up a loan modification, or another program that assists the consumer in staying in their homes."
NCLR’s counseling can be broken into three sectors. First is pre-purchase counseling.
"Although there are low interest rates and the lowest prices ever for homes, we don’t see our clientele taking advantage," NCLR’s Aponte said.
Secondly, it’s to get clients through the foreclosure process.
"There are all kinds of programs out there today," Aponte said. "Two of the bigger pieces now are forbearance, such as a 12-month program where you don’t have to pay your mortgage if you are looking for a job, and principal reduction programs."
Thirdly, counseling is to make sure clients are part of the bank settlement process.
"These were settlements because the banks steered our community into higher-interest loans that resulted in foreclosures," Aponte said. "We want to use our network to reach those families and give them the compensation they deserve."
Aponte and Kerstetter strongly agree on one thing: For-pay counseling is not the way to go, but it’s an uphill battle.
"It’s difficult to comprehend that we are a free service," Aponte said. "Companies advertise they will charge $5,000 and guarantee a modification. No one can guarantee this. We have more information than these scam artists, but somehow they’re marketing is more attractive and they are getting to our families faster than we are. It’s frustrating."