HUD Studies Suggest Counseling Keeps Owners in Homes

05/16/2012 By: Esther Cho 

Buying a home is the biggest financial investment many people will ever make. It’s also an investment that, in recent years, has become lost for millions. According to data from CoreLogic, since September 2008, there have been 3.5 million completed foreclosures.

Through counseling, HUD found homeowners are more likely to stay in their properties, even when facing foreclosure.
HUD released reports on two types of counseling: pre-purchase and foreclosure prevention. In both studies, HUD reported counseling significantly improved the likelihood homeowners remained in their homes.
The studies enrolled clients in the fall of 2009 and early 2010. For those who enrolled into pre-purchase counseling, HUD revealed that 35 percent of participants became homeowners within 18 months of pre-purchase counseling and only one of those buyers fell behind on mortgage payments.
The foreclosure counseling study revealed that of those who received assistance, nearly 70 percent obtained a mortgage remedy to retain their home, and 56 percent cured their defaults and became current again.
“The evidence is clear, with a little investment on the front end, we can go a long way toward improving the chances families will buy a home they can afford and sustain their homes in the long run,” said Raphael Bostic, HUD’s assistant secretary for policy development and research.

Pre-purchase study
For the pre-purchase study, 573 people enrolled in counseling services in fall 2009 from 15 HUD-funded counseling agencies across the country.
Most purchasers, or 71 percent, had a FICO score of 620 or higher, and 72 percent were reported as having completed counseling by their housing counselor.
Participants represented different racial backgrounds (52 percent African American, 32 percent White, 16 percent of another race or multi-racial, and 19 percent Hispanic), and 51 percent were under age 35.
Foreclosure study
HUD’s foreclosure counseling study included 824 foreclosure clients. About three-quarters of the homeowners fell behind on payments because of a loss of income, and very few had any savings for their missed payments.
Homeowners who sought counseling before becoming delinquent or in the early stages of delinquency (1-3 months) were more likely to obtain a remedy, retain their home, and become current on their mortgages.
Most study participants attempted to contact their servicer when they first fell behind but were unsuccessful in negotiating with their lenders.
At the 18-month follow up period, nearly 70 percent of clients who sought counseling before becoming delinquent were in their home and current on payments, whereas only 30 percent of clients who were six or more months behind at the time they entered counseling were in their home and current at follow-up.
The study also found that those who sought counseling via telephone tended to have more income and savings, were less likely to be a minority, lived in more geographically dispersed areas, and achieved stronger housing outcomes.
According to the study, this may suggest expanding telephone counseling provided an important alternative for those who can’t receive in-person couns