Counseled Homeowners Face Hurdles in Reaching Servicers

""NeighborWorks America"":http://www.nw.org has boosted funding for foreclosure prevention guidance through its ""National Foreclosure Mitigation Counseling Program"":http://www.nw.org/nfmc, yet an alarming number of distressed homeowners who have been instructed by advisors to contact their mortgage servicer have had a hard time reaching them or received disappointing resolutions.
According to NeighborWorks' most recent ""report to Congress"":http://www.nw.org/network/nfmcp/documents/ExecutiveSummary.pdf, 373,169 homeowners received foreclosure prevention advice through its national counseling program between March 1, 2008 and March 31, 2009. NeighborWorks is a nonprofit entity created by Congress to help combat the nation's foreclosure crisis by increasing and improving the availability of housing counseling for families at risk of losing their homes.
The organization was named administrator of nearly $450 million in federal funding to further this effort and support foreclosure intervention training. So far, NeighborWorks has awarded 4,447 scholarships, totaling $333 million, to foreclosure counselors.
Despite the increased funding and the growing number of foreclosure assistance professionals in local communities, NeighborWorks says counselors continue to report that the most common challenge they encounter when trying to save a homeowner from foreclosure is obtaining a timely response from servicers, with 17 percent typically waiting between 45 and 60 days for servicers to reply. And seven percent of foreclosure advisors said servicers were generally uncooperative when contacted.
A group of 15 U.S. senators, led by ""Sen. John Reed"":http://reed.senate.gov/index.cfm (D-Rhode Island), sent a letter to HUD Secretary Shaun Donovan last week in response to these statistics. Lawmakers wrote:
""Regrettably, we hear on a daily basis from constituents who are struggling under the burden of unsustainable mortgages and are in danger of foreclosure. Of particular concern are homeowners who have been instructed by HUD-approved counselors to contact their servicer only to be rebuffed, or worse, never even reach their servicer. Furthermore, statistics from the National Foreclosure Mitigation Counseling Program indicate that homeowners who do reach their servicers are waiting on average, 45 to 60 days for a response. Responsible homeowners are seeking help but simply running out of time.""
The senators pointedly asked Donovan what steps HUD was taking to hold servicers accountable for not answering or providing inadequate assistance to their constituents, and what additional legislative tools were required to address this problem.
In addition to the lengthy response times, NeighborWorks said counselors have difficulty communicating with servicers because loss mitigation departments seem to be understaffed and overworked; documentation faxed or mailed to servicers was lost repeatedly and had to be resent multiple times; and counselors were connected to a different representative who proposed different solutions and requirements each time they called.
Foreclosure counselors also reported a number of challenges when attempting to obtain a workout from servicers, most notably that loan modifications, forbearances, and principal writedowns were offered less frequently than repayment plans, and that falling home prices have left borrowers ""upside down,"" which meant servicers were not willing to provide modifications.
Nine percent of foreclosure prevention counselors receiving funding from NeighborWorks also reported challenges with borrowers - namely the borrower not following through with the counselors or their advice. Seven percent said homeowners seeking assistance had come to them too late in the foreclosure process to come to a resolution, and six percent said their own agency was unable to handle the growing volume of counseling requests because of limited staff.
NeighborWorks' report showed that overall, 76 percent of homeowners who received counseling through its programs had not entered foreclosure as of February 2009. Eighteen percent had a foreclosure start and six percent completed the foreclosure process after counseling.
The agency also noted that 49 percent of homeowners seeking foreclosure advice reported the reason they were at risk of foreclosure was a reduction in or loss of income, up from 45 percent in NeighborWorks' February update and 41 percent in October. Only seven percent were in default because their loan payment had increased.