Chicago’s Home Ownership Preservation Initiatives (HOPI) is an early example of a one-stop approach to foreclosure prevention that includes both counseling and research efforts to prevent foreclosures now, reduce foreclosure risk in the future and mitigate the damage foreclosures can cause.
HOPI was launched in 2003 in response to high rates of foreclosures in Chicago over the prior 10 years. The City of Chicago, Neighborhood Housing Services (NHS) of Chicago, and the Federal Reserve Bank of Chicago created the initiative and brought together partners from lending, investment and servicing institutions as well as nonprofit organizations and the public sector.
HOPI uses a four-part strategy for foreclosure prevention:
- Pre-purchase and post-purchase counseling and education
- Direct intervention with delinquent borrowers
- Rehabilitation of foreclosed properties
- Research and analysis of best practices for the mortgage and servicing industry
Since 2003, the initiative has prevented more than 3,000 foreclosures, reclaimed 790 vacant, troubled buildings and counseled more than 16,900 Chicagoans.
The City of Chicago’s 311 non-emergency hotline is at the heart of HOPI’s direct intervention strategy. Hotline operators connect delinquent borrowers with reputable credit counselors who can also help borrowers deal with their financial problems and negotiate with their loan servicer to avoid foreclosure. Borrowers are also linked with NHS or the city’s Department of Housing for financial assistance, such as mortgage refinance or a short-term loan.
The City of Chicago is one of many cities that use an existing non-emergency hotline to direct homeowners to foreclosure prevention resources. Communities without a non-emergency hotline can point residents to 1-888-995-HOPE, a national foreclosure prevention number provided by the Center for Foreclosure Solutions, a project of NeighborWorks America.
Another key element of the Chicago initiative is the close cooperation of lenders and servicers who help pay for the costs of the counseling, agree to restructure loans when needed and work with the city on the disposition of foreclosed properties.
In Connecticut, homeowners facing financial hardship or interest-rate reset were able to refinance into a 30-year fixed-rate mortgage through the Connecticut Fair Alternative Mortgage Lending Initiative and Education Services Program (CT FAMLIES). The interest rate on CT FAMLIES loans was the same as the rate for the state’s first-time homeowner mortgage. CT FAMLIES could also be used to refinance mortgages on owner-occupied single-family homes and condos, as well as owner-occupied buildings with up to four units. Income and mortgage limits varied across the state and with the size of the home or family. Second mortgages of up to $25,000 were also available for closing cost assistance, tax delinquencies or to help families with an outstanding mortgage balance greater than the current value of the home. The program has been discontinued.
The Delaware Emergency Mortgage Assistance Program (DEMAP) provides loans to help families experiencing a temporary financial hardship due to circumstances beyond their control. Borrowers that are at least 90 days delinquent and at risk of foreclosure can obtain a DEMAP loan for up to $25,000 or 24 months of mortgage payments. The loan may either be received as a single payment to bring the mortgage current or a series of smaller ongoing payments to assist with regular mortgage payments. Qualification is based in part on household income levels, which are annually adjusted. Small monthly payments are due throughout the loan period and are calculated based on the borrower’s income.
MassHousing, the housing finance authority for Massachusetts, offers 30-year, fixed-rate refinance loans to help borrowers reduce their mortgage payments. Loans can be used to refinance single-family homes, condos and two- to four-unit properties.
Expanding on the Home Protection pilot program, North Carolina offers a statewide Mortgage Payment Program to prevent foreclosures in households affected by job loss or other temporary financial setback. In high-unemployment counties, homeowners may receive a no-interest 36-month loan for up to $36,000. In the rest of the state, homeowners who qualify may receive a no-interest 24-month loan for up to $24,000. Loans may be offered as one-time sums, short-term loans or longer-term loans depending on the borrower’s circumstances. Applicants also receive a 120-day temporary stay of foreclosure upon receipt of their application. After five years in the property, the loan balance is reduced by 20 percent each year until year 10, when it is completely forgiven. If the home is sold or the mortgage is refinanced before that period (unless the refinance is to obtain better terms), the loan must be repaid.
Ohio’s Save the Dream program connects homeowners with legal services as part of a broad package of foreclosure prevention assistance. In April 2008, the state’s attorney, chief justice and Ohio State Bar Association president called for all qualified attorneys throughout the state to offer legal services to assist struggling homeowners. Attorneys represented homeowners, assisting them in restructuring their loans, mediating disputes with their lender and representing homeowners restructuring their loans, all for free. Ohioans could use the Save the Dream hotline to find assistance.
In Pennsylvania, the Homeowners’ Emergency Mortgage Assistance Program (HEMAP) has been a long-standing tool for helping homeowners during temporary financial crises. The program provides either a single loan to bring a mortgage current or continuing mortgage assistance for no more than 24 months, up to a maximum of $60,000. Borrowers must have a good mortgage payment history for the prior five years, with exceptions for periods of financial hardship beyond their control. The Pennsylvania Housing Finance Agency, which oversees the program, does not limit eligibility for HEMAP based on income, credit score or the amount of equity in the home. Lenders are required to inform borrowers of the HEMAP program if a mortgage is at least 60 days delinquent.
Monthly payments vary with household income to ensure that HEMAP borrowers do not pay more than 40 percent of household income on housing costs. The minimum monthly payment is $25 per month. For households repaying based on the 40-percent calculation, the loan has an interest rate of nine percent; interest does not accrue when the loan is on a $25-per-month repayment plan.
The state developed HEMAP with some flexibility to be able to provide even more assistance in times of high unemployment. If the average unemployment rate in the state is 6.5 percent or higher, applicants for HEMAP loans can receive up to 36 months of assistance and will be able to repay the loans based on 35 percent of income going toward combined housing costs, rather than 40 percent.
The program was created in 1983 and is funded principally through the repayment of HEMAP loans. When needed, these funds are augmented through state appropriations. In July 1, 2011, the program did not have sufficient funds to make additional loans and was temporarily suspended for new borrowers. In July 2012, the program received funding through 2017. Most of this funding came from a $25-billion multistate settlement with the nation’s five largest mortgage servicers after widespread investigations into abusive mortgage servicing practices.
In 2008, Philadelphia decided to implement a foreclosure mediation program to deal with the overwhelming number of cases coming into the court. A judge pulled together a steering committee of stakeholders, and within seven weeks the committee had designed a program to reduce court dockets, avoid foreclosures and achieve better outcomes for both homeowners and lenders.
Philadelphia uses mandatory mediation, and a mediation appointment is automatically scheduled for homeowners for approximately 45 days after they are notified their lender has filed a foreclosure complaint. In the notice is a hotline number to call to connect with a local housing counselor to help advise the homeowner.
The counselor drafts a plan and sends it to the lender prior to the mediation session. Mediations are held weekly in a local courtroom, and the parties — the servicer or a representative of the servicer, the homeowner and a housing counselor — initially meet without a mediator in a conciliation conference. If negotiations stall, the parties can request formal mediation in a private room.
Without additional funding, Philadelphia City departments incorporated the program into their existing workloads, and local attorneys volunteered their time and expertise as mediators. Outreach to explain the importance of participating in the mediation process to endangered homeowners has been key for the Philadelphia program, and the city has provided money to support those efforts.