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Power of counseling saves struggling homeowners $175 a month

(6/29/2012) - An estimated one in five struggling homeowners - perhaps as many who aren't struggling - are walking around with mortgages as high as 8 percent.

When it comes to financial strain on the hearth, that's a lot like walking around with kind of strain on the heart caused by high blood pressure.

Luckily more than 1.3 million households have received mortgage checkups from the National Foreclosure Mitigation Counseling (NFMC) program and those who get modifications that lower the payment pressure by an average $175 a month, for an annual mortgage payment savings of $2,100 a year.

That's a total $372 million in annual savings enjoyed by homeowners counseled under the NFMC program administered by NeighborWorks America (NWA), a national affordable housing and community development operation.

According to NWA's latest report to congress, 38 percent of NFMC program clients spend half or more of their income on mortgage PITI (principal, interest, taxes and insurance) payments, 23 percent spend more than $2,000 on monthly mortgage payments, and 19 percent are spending a whopping 75 percent or more of their income on PITI.

The NFMC report also reveals 51 percent of homeowners seeking help have been women with a large share of all participants in California and Florida, states hardest hit by the housing crisis.

Foreclosure prevention saves money

Also, 20 percent of people served by NFMC counselors have mortgage rates that exceed 8 percent. The national level for the 30-year mortgage has averaged less than 5 percent since April 2010 and at or below 4 percent since late 2011.

These folks need a break.

A $200,000 mortgage at 8 percent costs $1,468 a month, at 4 percent? Only $955, according to ERATE's mortgage calculator.

"The program has had a real effect on families. It's a remarkable success," said NeighborWorks America CEO Eileen Fitzgerald."

Counseling services provided by NFMC range from basic financial budgeting and foreclosure avoidance action plans executed by the homeowners, to an advanced level where the counselor intercedes, provides hands-on assistance and even negotiates with the lender for a mortgage workout. The program also offers legal assistance.

NFMC is aligned with the Making Home Affordable Programs and offers counselors an online standardized Home LoanPort to streamline submission of modification packages.

The Rockefeller Foundation has issued grants for special document scanning information and NFMC contracted with the respected Urban Land Institute (ULI) to conduct ongoing evaluations of the program's efficacies.

Counseling pays off

One of the latest reports prepared by the ULI shows that homeowners who received NFMC counseling were nearly twice as likely to obtain a mortgage modification and at least 67 percent more likely to remain current on their mortgage nine months after receiving one, compared to like homeowners not in the program.

The program isn't helping deadbeats or homeowners trying to game the system with an ethically questionable strategic default - often used to force a lender into providing mortgage relief.

These homeowners often have been stiffed by employers struggling with a weak economy.

As with a previous NWA report, job loss or income reduction remains the primary challenge reported by NFMC counselors in helping clients mitigate foreclosures.

Along with more the half the help going to women, 31 percent of NFMC program clients were identified as racial minority homeowners, 20 percent were of Hispanic origin, 66 percent were classified as low income, all groups disproportionately impacted by the foreclosure crisis.

Unfortunately, the funding rung is being pulled out from under the successful program.

Initial federal funding of $360 million in 2008 has dwindled to $80 million in 2012.

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