Four independent research studies supported the benefits of mortgage counseling through findings released this week. The studies, conducted by Harvard University, The Urban Institute, Federal Reserve Board of Governors, and National Council on Aging, confirmed the favorable impact that mortgage counseling has had during the economic crisis.
“Alarmingly, the continued availability of these much-needed services is in jeopardy due to recent federal government budget cuts that removed $88 million for housing counseling programs,” said Colleen Hernandez, president and CEO of The Homeownership Preservation Foundation. “We must restore this critical funding to ensure that financially distressed homeowners who desperately need reliable, accurate financial guidance can get it.”
Specifically, the organizations noted that HECM counseling is a “critical consumer protection service for senior citizens” who face financial insecurity or investment challenges and pointed to the recent Department of Housing and Urban Development budget cuts that have shifted the cost of mandatory pre-loan HECM counseling “at a time they may not be able to afford it.”
Among the study findings, homeowners were 200% more likely to receive a loan modification if they went through mortgage counseling upfront. Counseling also raised the probability of a homeowner receiving a loan modification that cures a serious delinquency or foreclosure, and improved the chances of a modification curing a serious delinquency or foreclosure leading to a borrower remaining current on the loan after the modification.
Numerous HECM counseling organizations have urged HUD to restore the housing counseling funding in order to avoid having to raise the cost of HECM counseling for borrowers.
Written by Elizabeth Ecker