Due to the sharp rise in mortgage defaults during the foreclosure crisis, many communities instituted programs that focused on keeping existing homeowners in their homes. Foreclosure prevention programs help homeowners who are delinquent on their mortgage payments and are in danger of foreclosure or a forced sale that will strip them of their home and any accumulated equity. By providing these families with counseling and access to affordably priced refinancing options, foreclosure prevention can keep families in their homes while preserving home values and stability in the surrounding community. By helping families understand their rights and either remain in the property or find a new affordable unit when displacement is unavoidable, state and local communities can help families regain their footing and stabilize affected neighborhoods as well.
Policies and Strategies
Foreclosure prevention policies can target assistance directly to families in need or they can focus at the community level by reusing foreclosed properties and modifying the regulatory environment to reduce additional foreclosures and their impact on neighborhoods. The policies that can help prevent and respond to foreclosures vary depending on how deep into financial trouble families are and how much of a toll foreclosures have taken on neighborhoods.
In response to the 2008 foreclosure crisis, states and localities adopted a range of short- and long-term educational, financial, legal and regulatory policies for preventing foreclosures and protecting affected families and communities. Foreclosure prevention strategies often include immediate assistance such as 24-hour hotlines, short-term loans, flexible refinancing programs and legal assistance. Some communities also instituted mediation programs to encourage borrowers and lenders to assess foreclosure alternatives, while others have extended the foreclosure timeline to give borrowers more time to assess their options or find new housing if foreclosure is inevitable. Additional policies, such as predatory lending restrictions, go a step beyond immediate assistance and aim to reduce the risk of foreclosures in the future.
At the federal level, the U.S. Department of the Treasury launched the Hardest Hit Fund (HHF). HHF was authorized under the Troubled Asset Relief Program that Congress passed and President George W. Bush signed into law in 2008. HHF programs were designed and administered by housing finance agencies in the 18 hardest-hit states and the District of Columbia as determined by unemployment rates at or above the national average or home price declines greater than 20 percent. Many of the programs offered through HHF worked to support successful initiatives that were already ongoing.
The Center for Responsible Lending is a nonprofit, non-partisan organization that works to protect homeownership and family wealth by fighting predatory lending practices. Its focus is on consumer lending: primarily mortgages, payday loans, credit cards, bank overdrafts and auto loans. CRL conducts research on the extent and impact of predatory lending to provide useful information to consumers, community advocates and policymakers alike. It also shares its market and legal knowledge with advocates and policymakers across the nation.
The Consumer Financial Protection Bureau shares resources for homeowners seeking mortgage help, along with information on where to report mortgage modification scams, should homeowners suspect they have been scammed by an individual or organization.
Through its Homeowner’s HOPE™ Hotline, 888-995-HOPE, Homeownership Preservation Foundation (HPF) provides comprehensive financial education and confidential foreclosure prevention counseling for free 24 hours a day, in over 170 languages. Since 2007, HPF has served more than 9 million distressed homeowners who depend upon HPF to be a trusted, neutral source of information and assistance. HPF also provides homebuyer education.
HUD sponsors housing counseling agencies across the country that provide advice on homebuying, renting, mortgage default and foreclosure issues at no cost.
The National Consumer Law Center is a nonprofit that works for consumer justice and economic security for low-income and other disadvantaged people, including foreclosure and mortgage-related issues. Its website includes information on foreclosure mediation programs by state.
The National Foreclosure Mitigation Counseling (NFMC) program was launched in December 2007 with funding from Congress to address the foreclosure crisis by increasing the availability of housing counseling for families at risk of foreclosure. NeighborWorks America distributed the funds through a competitive grant process to grantees across the country. More than 1,700 counseling agencies participated in the program, and over 2.1 million customers were counseled.
Hardest Hit Fund’s Greatest Hits. 2016. Kaitlyn Snyder. National Housing Conference.
Foreclosure Mediation: Emerging Research and Evaluation Practices. 2011. Melanca Clark and Daniel Olmos. U.S. Department of Justice Access to Justice Initiative.
It’s Time We Talked: Mandatory Mediation in the Foreclosure Process. 2009. Andrew Jakabovics and Alon Cohen. Center for American Progress.