There is help for those facing foreclosure
Sara Gilbert/The Coloradoan (Fort Collins,CO)
27 January 2012

The number of foreclosure filings is on the increase in many areas in Colorado in recent months after a slowing of these filings in 2011. The reasons for the increase in our area are varied and likely differ by region and lender.

Some mortgage lenders may have held off on the filing of a foreclosure, and just now they seem to be taking action to begin the foreclosure process with more homeowners.

The good news is many of those filings actually will never become a full-blown foreclosure sale with the homeowner losing their house. Despite news reports, homeowners do often find solutions to resolve their mortgage delinquency issues before the house gets sold at a foreclosure auction.

Getting advice about your options is critical to making the best decision that you can for your circumstances. Foreclosures are complicated, and the options to avoid them are equally complicated.

Homeowners might be able to catch up on the payments, refinance the loan if not yet behind on payments, modify the original terms of the loan, sell or short sell the home, ask the lender to take a deed in lieu of foreclosure, or move and rent the property until they can better afford the payment. Each of these choices has their own set of necessary steps to take and consequences to consider.

A program throughout the U.S. called the National Foreclosure Mitigation Counseling Program, or NFMCP, has helped many homeowners get the free housing counseling and advice that they need.

Through a newly released study this week there is a strong indication that homeowners who seek out a HUD certified housing counseling agency to provide them guidance were much more successful in avoiding foreclosure.

The Urban Institute released the following news release after it recently completed its evaluation of Rounds 1 and 2 of the National Foreclosure Mitigation Counseling, or NFMC, program.

The final report, released this week, demonstrates significant positive effects for NFMC participants: Counseled homeowners were more likely to receive better loan modifications, cure a serious delinquency or foreclosure and stay current, and avoid a foreclosure completion altogether.

Key findings of the report:

» Counseling greatly increased the ability of homeowners to stay current once they cured a serious delinquency or foreclosure.

Counseled homeowners were at least 67 percent more likely to remain current on their mortgage nine months after receiving a loan modification cure. A small part of this effect is attributable to the impact of counseling on the size of monthly payment reductions.

However, a significant part is attributable to other positive impacts of counseling, such as helping homeowners improve their financial management skills and assisting them in managing relationships with servicers.

» NFMC counseling made it more likely that homeowners would receive a modification cure in the first place -- nearly doubling the odds of modification cures for counseled homeowners compared to noncounseled ones.

The Home Affordable Modification Program which is a government program to encourage modifications amplified this positive effect. In the period before HAMP, 8 percent of homeowners receiving counseling assistance had modification cures, compared to 5 percent who did not receive counseling. Post-HAMP, 17 percent of homeowners receiving counseling assistance had modification cures, compared to 9 percent without.

» Counseled homeowners received loan modifications resulting in a monthly payment that was $176 less, on average, than non-counseled borrowers - a savings of close to $2,100 a year. This savings was achieved on loans modified either before or after HAMP was implemented.

Overall, the Urban Institute evaluation demonstrates that the NFMC program is having its intended effect of helping homeowners facing loss of their homes through foreclosure. The positive effects demonstrated in the final report are strong and are consistent with those found in prior analyses of Rounds 1 and 2.

Homeowners can reach housing counseling help through a number of reliable and free resources available in Colorado.

The Colorado Foreclosure Hotline can be reached by calling (877) 601-HOPE (4673). To find a HUD approved housing counseling agency in your area, go to www.hud.gov and search for Housing Counseling.

GreenPath is a HUD approved housing counseling agency and housing counselors are available to help homeowners evaluate their options. Getting help may feel overwhelming, but the study above proves it may be the only way to go so that you can know all of your options.

Sara Gilbert is the Colorado group manager for the local GreenPath (formerly Consumer Credit Counseling Service), 1247 Riverside Ave., Fort Collins. Call her at (970) 229-0695 or send email to sgilbert@greenpath.com.