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KEYS TO HOMEOWNERSHIP
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The foreclosure crisis is still very much with us. The Mortgage Bankers Association recently reported that in the third quarter of 2009, 14.41 percent of all mortgage loans – one in every seven homes – were either one payment past due or in some stage of foreclosure and that this was a record high.
At the first sign of trouble, such as income loss or adjusted payment too high for income, homeowners should take action. Homeowners themselves must take the initiative, and the first thing to do is to find expert nonprofit HUD-approved housing counselors to help them and avoid any companies that charge upfront fees to provide this help. See the list of websites, phone numbers and organizations at the end of this article for help.
As we wrote last month, homeowners should be alert to and avoid loan modification and foreclosure avoidance scams. In a time of national financial crisis, affecting millions of homeowners, fraudulent financial services companies have compounded the pain by offering costly but useless services promising relief to delinquent and distressed homeowners.
Homeowners need to avoid any companies selling mortgage modification and foreclosure avoidance plans which charge upfront fees. These companies and individuals only take your money and leave you with the problems you asked them to solve. We have never heard a positive story of a homeowner actually getting help from a private mortgage modification company. We only hear the sad stories of the $1,000 to $4,000 in funds spent with no positive results.
Patience, Persistence and Preparation Needed
Another reality, as documented in a recent Urban Institute study, is that reaching, working with and getting responsive action from a lender or servicer on a homeowner’s mortgage payment problems is the number one difficulty of borrowers, as well as the number one difficulty of professional housing counselors. In spite of these frustrations, homeowners must avoid the promises of quick solutions by promoters of loan modification schemes and the infamous foreclosure rescue scams.
How difficult is it for homeowners to get lenders to respond to their calls about mortgage payment problems and possible options? It is very difficult! We have often made joint calls with homeowners to their lenders and servicers, and it is a challenging process, but it is much better when supported by the free nonprofit counselors.
Lenders are overwhelmed with the millions of homeowners in trouble, so it takes preparation and hard work to get through the process. Homeowners should organize all of their information including income, savings, credit and debt information and the details of their home loans. Lenders want documentation on all of this to help them figure out what options might be available.
Calls to the lender go through a challenging series of steps. First, it can take a very long time on the phone going through multiple prompts to reach a person who will discuss a borrower’s payment situation. Second, dropped calls and long waits on hold are very common and must be accepted as a necessary part of the process. Third, it is unusual to be able to speak more than once with the same representative of the servicer. Fourth, it is common to find that the lender/servicer representatives reached by phone know nothing about the process for a homeowner to follow on the lender’s website, if that is where the homeowner started. Fifth, follow-up letters from different departments of the lender/servicer often provide varying guidance, requests, warnings, etc., which can be very confusing and frustrating for the homeowner. Homeowners should steel their patience and understanding to navigate through the lender/servicer bureaucracy to get to the point at which proposed solutions are made by the lender/servicer to the homeowner. Patience, persistence and imagination may all be necessary.
Getting Results
The Urban Institute study of homeowners facing mortgage payment difficulties found that those counseled through the NeighborWorks America “National Foreclosure Mitigation Counseling Program (NFMC)” had better outcomes than they would have had without it. During the first year of the program, in 2008, the Urban Institute study found that “counseled homeowners were about 1.6 times (60 percent) as likely to get out of foreclosure, and avoid a foreclosure completion, than they would have been had they not received NFMC program counseling.”
Also in the first year of the NFMC program, “Loan modifications received by NFMC program clients resulted in significantly lower mortgage payments than would have been received without the help of the program. Lower monthly payments help reduce the likelihood of a subsequent recurrence of borrower mortgage problems. On average, it is estimated that NFMC program clients who received loan modifications reduced their monthly payments by $454 more than they would have without NFMC program counseling.”
In regard to successful counseling strategies, the Urban Institute found that “The most commonly reported individual success was helping clients create a budget and action plan to get to the root of the client’s financial problems. More than 15 percent of all survey responses listed this as a successful strategy.”
Action steps for homeowners all start with notifying their lender as soon as possible that they may be or are already in payment difficulty and that they are working on solutions. However, we also strongly urge homeowners to seek professional housing counseling immediately to review their options and to develop a plan of action. It is best to do this before any in-depth discussion with their lender/servicer on possible courses of action from borrowing funds, refinancing, obtaining a loan modification, all the way to selling and renting. All possible options should be considered.
Homeowners should prepare thoroughly for discussions with a HUD-approved housing counselor and with their lender or servicer. First, the homeowners should write down the reasons why they are behind on their mortgage payments and for how long and what contacts or communications they have had with their lender or servicer. Secondly, they should describe the steps taken to manage their payments. Thirdly, the homeowners should develop a realistic family budget, identify how they can reduce expenditures and increase family income, and explore what financial assistance they might obtain from family and friends.
Homeowners can explore their options including the Making Home Affordable Refinance and Modification programs (www.makinghomeaffordable.gov) by calling their lender or servicer, or the national HOPE Hotline at 888-995-4673, or by contacting one of this area’s HUD-approved housing counseling agencies as follows: Housing Counseling Services, 2410 17th St. NW, 202-667-7006; Latino Economic Development Corporation, 2316 18th St. NW, 202-588-5102; Lydia’s House, 3939 South Capitol St. SW, 202-373-1050; Marshall Heights Community Development Organization, 3939 Benning Road NE, 202-396-1200; or University Legal Services, 220 I St. NE, 202-547-4747 and at 3220 Pennsylvania Ave. SE #4, 202-581-0600. Additional resources are at www.hud.gov. |
