Could Housing Counseling Use an Upgrade?

Housing counseling as a resource to reduce the need for loan modification and foreclosures has been shown to be very beneficial since the housing crisis, but according to the Urban Institute, though it’s proven itself to be helpful, there is still more housing counseling can do to further impact homeowners. Urban Institute cites that with 2 percent of loans in foreclosure and 8 percent underwater, counselors and lenders can start looking forward once again.

The report states that because of the changes in the demographics for homebuyers in the next generation, it is imperative that the counseling continue with not just their current work, but expand their practice to further progress.

Because housing counseling can benefit homebuyers in more ways than just successfully entering into a healthy stance of homeownership, Urban Institute points out that with housing counseling, consumers can potentially increase their savings, reduce debt, raise their credit scores, decrease reliance on payday lending, reduce financial stress, and improve financial satisfaction.

They share that housing counseling presents evidence of a multitude of impacts including homeowners being more likely to sustain homeownership post counseling as well as developing skills to manage their finances such as a financial cushion on top of a down payment. Additionally, this service can help those families that aren’t ready to buy a home in the near future better prepare themselves to purchase in a reasonable time frame. Another impact includes teaching these prospective homebuyers their options rather than just pushing them towards ownership as the only way to build assets.

Despite the fact that these impacts have proven effective in reducing the foreclosure and loan modification rates, the report adds that housing counseling must continue to grow and evolve. They report that this could be done by taking into consideration the length of time it may take for the consumers to prepare and decide it’s the right time for them to buy a home. Likewise, they could benefit from integrating other types of counseling such as workforce and credit counseling into their practice to fully benefit the consumer. They state that housing counseling could also better track client outcomes beyond receiving the loan by making that tracking more thorough.

Urban Institute also states that housing counseling’s funding could stand to be improved as it is not where they deem acceptable currently. According to the report, the roughly $47 million funded by the US Department of Housing and Urban Development (HUD) is in their eyes, insufficient as well as the $40 million funded by National Foreclosure Mitigation Counseling, a $10 million decrease in funding from 2015.

New funding models are beginning to emerge, though according to the report. Housing counseling will be included in Fannie Mae’s 97 percent loan-to-value program, HomeReady. Wells Fargo also provides an interest-rate discount for counseling on its low–down payment loans.

The report shares that while these benefits initially go straight to the borrower, they should provide a pathway to customer support for counseling. This is a strategy the report shares counseling agencies are beginning to see as smart, from both an incentive and revenue perspective.

Likewise, organizations such as Homewise are including counseling as a part of a full continuum of services ranging from real estate brokerage to lending and development. This they say will enable support for counseling to be embedded in a broader business model.