Unemployment, High Rates Still Obstacles for Many Facing Foreclosure

The National Foreclosure Mitigation Counseling (NFMC) program has provided counseling to almost 1.6 million homeowners across the country since the program started in 2008.

According to an NFMC congressional report released Monday, common attributes of struggling homeowners include unemployment or underemployment and high mortgage rates.

About 62 percent of homeowners reaching out for foreclosure prevention counseling report income loss or reduction as the primary reason they are delinquent on their home loan, according to NFMC.

NFMC also pointed out that 37 percent of homeowners receiving counseling spend more than half their income on monthly mortgage payments. About 19 percent spend more than 75 percent of their income on mortgage payments, according to NFMC.

“Although the economy is improving, there are still many homeowners who need foreclosure prevention counseling and the NFMC continues to assist thousands of families,” said Eileen Fitzgerald, CEO of NeighborWorks America, which administers NFMC.

Almost 20 percent of homeowners receiving counseling through NFMC programs have mortgage loans with interest rates of 8 percent of higher.

However, NFMC pointed out in its report that this is down from 40 percent in October 2008.

Homeowners who receive counseling through NFMC are more likely to obtain loan modifications, and when they do they are more likely to receive higher monthly savings on their mortgage payments and are also less likely to redefault on their loans, according to NFMC.

When a homeowner seeks counseling, he/she is 97 percent more likely to obtain a loan modification and avoid foreclosure, according to data from the first two years of the NFCM program.

The average counseling recipient’s monthly payment reduction is about $176 greater than the savings obtained by a homeowner who did not receive counseling, accruing savings of $2,100 per year for counseled homeowners, according to a review conducted by the Urban Institute.

“A homeowner who receives help from the NFMC program saves significant money and time, and importantly, often is able to remain in their home,” Fitzgerald said.

The Urban Institute also estimates that by helping homeowners and preventing foreclosures, NFMC has saved homeowners, lenders, and local governments about $920 million.

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