In trouble with your mortgage? Feeling a bit desperate? What to do, what to do?
Don’t fall for a scam that offers you quick and ready help. Instead, call a counselor.
Counselors work, according to a recent study by the Urban Institute. Since 2007, when the National Foreclosure Mitigation Counseling program was founded to help distressed homeowners, $410 million has gone into the program. Over 750,000 were helped through the end of 2008. These borrowers were 60% more likely to keep their homes if they received counseling. Their monthly payments were decreased to an average of $454.
Part of the counselor’s job is to help homeowners evaluate whether they can afford to keep their homes and then to help them gather the loan documents the lender needs to consider a modification.
This is an interesting finding in view of recently released statistics that 51% of loan modifications in the last year were in default by the end of 2009. Did something change in the finances of those counseled? Did counseling standards change as new federal programs encouraged more people to seek a counselor? Were counselors too optimistic and those served so anxious to keep their homes that they agreed to a payment schedule that was still too high for their income? Further studies into why re-defaults occurred in 2009 will undoubtedly reveal some needed insights.
The newest federal program announced that March 26 attacks the double-headed monster of negative equity and unemployment. Most analysts of past housing remedies blame the failure of lenders to reduce principal and bring housing values and loan values more in sync. The new program offers lenders incentives to offer principle reduction and provides temporary help to people who are unemployed. Even though the program is only hours old at this writing, no one expects that this is the silver bullet that will “fix housing” either.
Counselors are constrained by available programs to offer their clients. Regardless of the program, counselors link those who can be helped to ways to get help even if the help is not the final answer to their problems. This stark reality does not undermine the findings from 2008: Counseling works!