All loss mitigators are not created equal. The odds of curing a foreclosure and avoiding redefault are 1.7 times better for homeowners enrolled in the National Foreclosure Mitigation Counseling (NFMC) Program than for homeowners who do not receiving such counseling, according to the Urban Institute. The group released a report yesterday analyzing the NFMC program December 2009. NeighborWorks America is the Congressionally appointed administrator of the program.
“The NFMC program results clearly demonstrate the value of counseling,” said NeighborWorks America CEO Ken Wade. “The findings announced today illustrate the real household and economic benefit foreclosure counseling can have for families facing foreclosure.”
Overall, the loss mitigation game is tawdry. The playing field is crowded and muddy as real estate agents and lenders see new opportunities to create ancillary revenue streams, with negligible results. Unlicensed loan modification companies charge upfront fees to unsuspecting homeowners, close their doors before they are caught, and pop up across town wearing a new name and address, staying one step ahead of the law.
The best deal in town for homeowners facing foreclosure is free. Homeowners who obtain a mortgage modification through the NFMC program counseling save an average of $555 per month through lower payments, compared to savings of just $288 per month for homeowners who don’t work with an NFMC program counselor, according to the Urban Institute.
The report states:
The re-default rate for homeowners counseled through the NFMC program was better than that for homeowners who didn’t receive NFMC program counseling. The NFMC report estimates that, for a group of typical NFMC clients, 64 percent of counseled homeowners who received a default-curing mortgage modification remained out of serious delinquency or foreclosure after eight months. In contrast, only 51 percent of these loan modifications would have avoided becoming seriously delinquent or entering foreclosure without NFMC program counseling services.
The report also found that the likelihood of curing a foreclosure was better when an NFMC program counselor was involved, even if the homeowner had been in foreclosure for many months. According to the report, for a group of typical NFMC program clients whose loans enter foreclosure, an estimated 55 percent of these foreclosures would cure within 12 months of when the foreclosure started with the help of an NFMC program counselor, compared to only 38 percent otherwise.
Homeowners’ Prospects for Success Brighten
The end of the year sees a flurry of changes and confabs with a focus on helping homeowners keep their homes. Lenders like Chase and Wells Fargo are planning a new round of mega events nationwide, assembling teams of loss mitigators for one-on-on sessions. In many cases, lender reps will have authority to issue onsite resolutions and loan modifications.
Success rate of HAMP and non-HAMP loan modification is hindered by a lack of industry wide standards. The term “imminent default” used in HAMP guidelines, is subject to lender interpretation and underwriter discretion evaluating hardship and financial readiness. HUD’s LoanPort web portal offers increased efficiency and standardization for application and data delivery to a numerous servicers. Additionally, counselors have new, direct access to loss mitigators via dedicated phone and fax lines.
Read the full report: National Foreclosure Mitigation Counseling Program Evaluation