Real Estate Market

Homeownership counseling again proves invaluable

(12/29/11) Erate Exclusive - So many studies come to the same conclusion about counseling, you just shouldn't leave a homeowner without it.

The latest report from NeighborWorks America prepared by the Urban Institute (UL) examined the consumer benefits of the federally-approved National Foreclosure Mitigation Counseling (NFMC) Program.

It says 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 the modification, saving homeowners their homeownership and loan servicers considerable time and expense.

A mortgage modification occurs when the lender reworks the terms of an existing home loan, typically to lower payments and make the home more affordable, according to Silver Spring, MD-based mortgage expert Peter Miller's "The Quick & Dirty Guide To Successful Mortgage Modifications" (Silver Spring Press, $2.99).

To get the payment down, mortgage modification lenders lower the interest rate, extend the loan term, reduce the principal or use any combination of those approaches.

Modification programs generally come with a homeowner counseling prerequisite. "All homeowners should be required to undergo financial counseling as part of the mortgage process. Having an independent and unbiased counselor review and essentially pre-underwrite the loan with the consumer participating could only result in a better lending decision for both the consumer and their lender," said Nancy Osborne, COO of, a Santa Clara, CA-based financial information publisher and interest rate tracker.

The institute compared NFMC loans with non-NFMC loans and found that NFMC counseled homeowners were 89 percent more likely to get a modification than those without the counseling.

The much maligned federal government's Homeownership Affordable Modification Program (HAMP), which mandates the kind of counseling offered by NFMC, helped boost the positive effect.

Before HAMP, 8 percent of homeowners receiving counseling assistance had modification cures, compared to 5 percent who did not receive counseling. Post-HAMP, 17 percent of homeowners receiving counseling assistance had modification cures, compared to 9 percent without.

Counseled homeowners also saved more money, receiving loan modifications resulting in a monthly payment that was $176 less, on average, than non-counseled borrowers - a savings of more than $2,000 a year.

"The NFMC program works incredibly well for homeowners and communities," said Eileen Fitzgerald, NeighborWorks America CEO.

Foreclosure prevention counseling, rather than the smaller modified loan payment, gets credit for the sustained reduced default rate, the study found.

"the great bulk of the sustainability benefit resulted from other impacts of counseling, such as helping borrowers to improve their financial management skills, assisting them in managing relationships with servicers/investors, and providing other types of support," according to the study.

"In short, the personalized work nonprofit housing counselors do to help homeowners improve their overall financial situation had the greatest effect on a homeowner not falling behind again on their mortgages in the future," said Fitzgerald.

What's perhaps most significant about studies extolling the virtues of counseling is that every homeowner should get counseled and learn the ins and outs of homeownership before they take the plunge or find themselves facing foreclosure.

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