The Congressionally-funded National Foreclosure Mitigation Program (NFMC) was established in 2008 in order to address the nationwide foreclosure crisis as well as increasing the availability of housing counseling assistance for homeowners that are distressed or are facing foreclosure in their communities. On Monday, eight years later, the two millionth homeowner facing foreclosure received counseling through the NFMC program, according to an announcement from Neighborworks America, which distributes NFMC funds to grantee organizations, which in turn provide the counseling services. A study from the Urban Institute found that homeowners who had been through NFMC counseling and then received a modification saved an average of $4,980 annually.
Nicole Harmon, VP of Foreclosure Mitigation Programs at Neighborworks America, recently spoke with DS News about counseling two million homeowners through the NFMC program.
DS News: What does the milestone of two million homeowners assisted by the NFMC program mean for the industry?
Harmon: We’re very excited that we have served more than two million homeowners and their families. This means that the funds we’ve received and deployed to counseling agencies through the NFMC program have done what they were supposed to do. The counseling agencies we’ve helped fund have stepped up to the rise in foreclosure since the beginning of the crisis, and been responsive to the needs of homeowners. In all, more than 1,700 counseling agencies have been a part of the NFMC program since 2008, either through direct grants or through their sponsorship by national HUD housing counseling intermediaries and state housing finance agencies.
Through the past eight years, approximately 762 million has been invested into foreclosure prevention counseling, and to help fund training of housing counselors. Training funding by the NFMC program has helped counselors keep up with changing loss mitigation practices, all with the aim of affordably and sustainably keeping people in homes if possible. The money has really built the capacity of nonprofit housing counselors. The funds have paid the cost of about 15,000 scholarships to housing counselors, who have earned well over 11,000 certificates of program completion.
NFMC has had an important impact on the overall counseling industry impact. It has strengthened the housing counseling organizations who have participated, and we’ve been able to enhance that capacity through the grants funds that we’ve provided. The structure and discipline of the delivery of service and the quality of the foreclosure prevention counseling have been made better through the NFMC program. I’m not just saying this, however. The feedback that we’ve received through our quarterly and final reporting through each grant we’ve issued, tells me that the program has been effective. We’ve learned from the counseling agencies that this program has helped them improve methods of foreclosure counseling.
We’ve seen successes across the board, but especially in improved methods of communication between servicers and housing counselors. There’s still work to be done, of course, but because of better communication since the early days of the crisis, counseling agencies have lent their voice to ways to help make process improvements and create efficiencies that benefit homeowners. Perhaps chief among these improvements is how counselors transmit and track loss mitigation packages. There have been many successes, no doubt about that.
The impact to homeowners in particular is something that we should highlight as we hit this milestone. NFMC had a requirement written into the statute early on that we evaluate the effectiveness of what counseling provides as far as benefits to the homeowner.
Neighborworks engaged Urban Institute to conduct a longitudinal study. In the most recent final research report from them, which we posted to our website in 2014, we rigorously show that NFMC clients are three times as likely to receive a modification compared to homeowners who do not go through such counseling. The study also showed that counseled homeowners are one and a half times more likely not to re-enter a foreclosure or troubled status after receiving a loan modification cure with the help of a counseling agency. Overall, the results from the Urban Institute study shows there was an average reduction, in terms of costs savings to the government, that we’re saving tens of millions of dollars annually through these modifications that have been executed.
This two million homeowners served milestone also means that a relationship with a housing counselor has been established. A relationship that is meaningful and based on trust and cooperation. These are distressed borrowers who needed help and who have succeeded in reaching a reputable counseling agency. This relationship they now have with a trusted advisor in the counseling community is able to not only help them navigate them through their distressed situation, but now there is a relationship with a counselor that could be used later to secure homeownership again, if a home had been lost to foreclosure. The foreclosure prevention counselor can now be the homeownership advisor that helps rebuild a home owning future.
DS News: Why has the NFMC program been so effective?
Harmon: I can speak for the structure of the grant funds. These funds were established for counseling entities that already had a capacity for doing foreclosure mitigation counseling. While originally established as a one-time appropriation, the program has been extended and is now in its 10th round of funding. We have high standards. The counselors who are engaged in the NFMC program receive excellent training.
In addition, effectiveness could probably be linked to the peer-to-peer information sharing that goes on between counselors. Through webinars, conferences and other tools, counselors in the NFMC program have opportunities to learn from each other. Once we hear what works, the counselors can adapt to that. Moreover, NeighborWorks has always tried to have very strong relationships with servicers so that as programs change, whether they be federal programs or individual programs, we try to communicate that. So it’s a really tight program in terms of communication and training, and that’s why it’s so successful.
DS News: With housing fundamentals normalizing, how much of a demand for counseling is still out there?
Harmon: There are still places that are in distress and homeowners in need of assistance, especially in judicial states where the foreclosure process is a little delayed in coming through. So there is still a reach there. We just recently announced our 10th appropriation for NFMC, and that application process ended last month. The demand is great. In context of the appropriation we received nearly twice the request for funding than we were able to award. Consistently, we’ve seen the demand from the counseling community far exceeds the amount we have available.
The truth is, the demand is still out there, but in targeted communities. Some of the communities with foreclosure rates, delinquency rates, or foreclosure starts that are slightly above the average or above the national average. Those are the distressed communities that we’re most concerned with and looking to prioritize our funding in those places.