by Clare Duncan, National Housing Conference
On Monday, the Urban Institute released an evaluation of rounds 1 and 2 of the National Foreclosure Mitigation Counseling (NFMC) Program, which found significant positive effects for homeowners counseled through the program in 2008 and 2009.
The NFMC program began four years ago this December to address the foreclosure crisis by increasing the availability of housing counseling for families facing foreclosure. Grants are also made through the program to fund legal assistance for homeowners and to train counselors. NeighborWorks America was designated by Congress to distribute the funds and six rounds of funding have been awarded through the program to upwards of 1,700 counseling agencies since its beginning. $80 million was awarded to the program in the recent FY12 THUD appropriations bill, which was signed into law in November.
The evaluation, which builds off previous preliminary analyses of the program, was based on 335,000 loans and was designed to answer the following questions about the program:
- Did the NFMC program help homeowners receive loan modifications with lower monthly payments than homeowners would have otherwise received without counseling?
- For homeowners that cured (i.e., brought to current) a serious delinquency or foreclosure through a loan modification or some other means, did NFMC counseling help them remain current on their loans longer and more frequently than they would have been without counseling?
- For borrowers with seriously troubled loans, did NFMC counseling increase their chances of obtaining a cure and then sustaining that cure and avoiding redefault?
- Did the NFMC program help reduce the number of completed foreclosures?
Overall the evaluation answered “yes” to all four questions, finding significant positive effects for participants. Specifically, homeowners in the program were nearly twice as likely to obtain a mortgage modification as those not counseled through the program. In addition, participants were at least 67 percent more likely to remain current on their mortgage nine months after receiving one. Homeowners also received on average, a mortgage modification that lowered their payments by $176 more per month than homeowners who didn’t work with an NFMC counselor, a savings of close to $2,100 a year.
The evaluation also studied whether the program impact changed after the Home Affordable Modification Program (HAMP) began. The results found that NFMC counseling was just as effective or even more effective in helping homeowners facing foreclosure after HAMP began.
Given waning interest in the foreclosure crisis by policymakers as well as cuts to counseling funding (HUD’s housing counseling program which complements the NFMC program by funding a wider array of counseling services including pre-purchase education and financial literary was zeroed in the FY11 budget and received $45 million in FY12 – only half of what the program received in FY10), it is important that policymakers understand the benefits of housing counseling in keeping struggling homeowners in their homes and neighborhoods stabilized. The Center for Housing Policy released a factsheet earlier this year that highlights additional evidence that housing counseling helps to reduce mortgage delinquency and foreclosure.