National Foreclosure Mitigation Counseling Program
National Foreclosure Mitigation Counseling Program Congressional Update May 26, 2016 (data as of July 31, 2015)
Table of Contents Executive Summary ............................................................................................................................................ 2 Introduction ........................................................................................................................................................ 5 Funding Summary .............................................................................................................................................. 5 Counseling Services Grants ............................................................................................................................... 7 Counselor Training and Information Sharing ..................................................................................................... 8 Partnering to Facilitate Foreclosure Counseling .............................................................................................. 11 Urban Institute Evaluation of Program Effectiveness ...................................................................................... 12 Foreclosure Counseling by Geographic Area and by Homeowner and Loan Characteristics .......................... 13 Counseling Successes and Challenges ............................................................................................................ 27 Legal Assistance Grants ................................................................................................................................... 33 Quality Control and Compliance ....................................................................................................................... 36 Conclusion ........................................................................................................................................................ 38 Appendix Contents ........................................................................................................................................... 38
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Executive Summary In just over 8 years, the National Foreclosure Mitigation Counseling (NFMC) Program has served more than 1.9 million homeowners at risk of foreclosure and helped build the nation’s foreclosure counseling capacity. Since December 2007, Congress has made 10 appropriations totaling $853,185,000 to fund the NFMC Program. NeighborWorks® America (as authorized by the Neighborhood Reinvestment Corporation Act, 42 U.S.C. 81018107) was appointed to administer the NFMC Program and submits this report to Congress to provide an update on its status. Funding Summary As of July 31, 2015, NeighborWorks has awarded more than $762 million in grants to 198 HUD-Approved Housing Counseling Intermediaries, State Housing Finance Agencies and NeighborWorks organizations to fund foreclosure counseling and legal assistance to at-risk homeowners. Grant awards include the following:
Over $737 million for foreclosure mitigation counseling services (Round 10 to be awarded in 2016) $25.1 million for legal assistance to homeowners
NeighborWorks has also utilized more than $32.3 million that Congress has allocated for foreclosure counselor training and other related capacity-building activities. Administrative expenses comprise the remainder of the appropriated funds from Congress. Highlights of Program Results The most recent (10th) appropriation was made in December 2015, and grants of those funds will be awarded in the first half of 2016. The most recent grant awards took place on March 13, 2015, based on the ninth appropriation in December 2014. Based on program data as of July 31, 2015, the following items highlight NFMC Program achievements:
The NFMC Program has served a total of 1,950,781 homeowners in all 50 states, the District of Columbia and the U.S. territories. The NFMC Program has provided 14,477 scholarships for classroom training to housing counselors and other eligible staff from qualified nonprofit 501(c)(3) organizations. In addition, 10,962 certificates of completion have been earned for three foreclosure-related online courses developed with NFMC Program funds, of which 7,105 were funded through NFMC Program scholarships. The NFMC Program strengthened housing counseling organizations and enhanced their capacity through grant funds that helped them create improved methods of foreclosure counseling, communicate more effectively with mortgage servicers, make process improvements that include streamlining the counseling intake process to better manage the demand for services, and develop creative strategies to better reach homeowners in need.
In September 2014, The Urban Institute completed a second 4-year evaluation of Rounds 3 through 5 of the NFMC Program covering clients served from July 2009 to June 2012. The outcomes for these clients were observed through June 2013. Using a representative NFMC sample of 137,000 loans and a comparison non-NFMC sample of 103,000 loans, the Urban Institute was able to employ robust statistical techniques to isolate the impact of NFMC counseling and found the following:
NFMC Program clients are nearly three times as likely to receive a loan modification cure compared to noncounseled homeowners. NFMC Program-counseled homeowners were 70 percent more likely to remain current on their mortgage after receiving a loan modification cure. NFMC Program-counseled homeowners who received a modification achieved an average reduction in payment of $4,980 per year. Annual savings resulting from loan modifications for NFMC clients was approximately $518 million.
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The Urban Institute evaluation shows that the NFMC Program is achieving its goal 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 the Urban Institute’s prior analyses of Rounds 1 and 2 of the NFMC Program. Program Trends The largest share of foreclosure mitigation counseling provided by the NFMC Program has assisted homeowners in California and Florida, which are among the states hardest hit by delinquencies and the foreclosure crisis. Racial minority and low-income homeowners and neighborhoods, which have been disproportionately impacted by the foreclosure crisis, are well served by the NFMC Program. Nearly 67 percent of NFMC Program clients are classified as low-income and 35 percent are classified as racial and ethnic minority homeowners. Figure 9 in the report shows more details. The percentage of clients that reported having fixed-rate mortgages with interest rates below 8 percent increased from 30 percent in October 2008 to 63 percent in July 2015. Figure 15 shows more details. In 2007, an 8 percent interest rate was considered the prevailing rate and was therefore used as the benchmark to determine whether NFMC clients were obtaining more sustainable mortgages. Eight years later, the average mortgage interest rate has dropped to about 4 percent. The primary challenges of clients facing foreclosure, as reported by NFMC Program counselors, are reduction in or loss of income. This challenge has consistently accounted for 50 percent to 70 percent of client response since the fourth quarter of 2008, and peaked at 69% in the third and fourth quarters of 2010. To a lesser extent, clients still face affordability challenges even without a loss of income. Medical issues, divorce or separation, poor budget management, and an increase in mortgage loan payment are all contributing factors for borrower default, as shown in Figure 1. Figure 1: Trending Analysis of Primary Reason for Default 80% 70% 60% 50% 40% 30% 20% 10%
2008-Q1 2008-Q2 2008-Q3 2008-Q4 2009-Q1 2009-Q2 2009-Q3 2009-Q4 2010-Q1 2010-Q2 2010-Q3 2010-Q4 2011-Q1 2011-Q2 2011-Q3 2011-Q4 2012-Q1 2012-Q2 2012-Q3 2012-Q4 2013-Q1 2013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q2 2014-Q3 2014-Q4 2015-Q1 2015-Q2
0%
Calendar Year Reduction in or Loss of Income
Medical Issues
Increase in Loan Payment
Poor Budget Management
Source: NFMC Program reported data (as of 7/31/2015).
When NFMC Program clients enter counseling, roughly 38 percent are spending half of their income or more on their monthly mortgage payments for principal, interest, taxes and insurance (PITI), as shown in Figure 2. Twentythree percent are spending 70 percent or more of their income on PITI, probably due to partial or full unemployment. These percentages continue to raise concerns given that a qualified mortgage is commonly defined National Foreclosure Mitigation Counseling Program Congressional Report Page 3
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as having the accepted underwriting standard of 43 percent of a mortgagee’s income being applied toward PITI. The elevated percentages of NFMC Program clients have remained fairly consistent since 2008. A qualified mortgage, according to the Consumer Financial Protection Bureau (CFPB), is a loan that has more stable features that help make it more likely that a borrower can afford the home loan. If a lender offers a qualified mortgage, this means that the lender met certain CFPB requirements and followed the CFPB ability-to-repay rule. Figure 2: Clients’ Percentage of Income Paid to Principal, Interest, Taxes and Insurance
23.2%
30% or Less 31.5%
31%-39% 40%-49%
5.9%
50%-59% 60%-69%
9.2%
70% or More
16.5% 13.7%
Source: NFMC Program reported data (as of 7/31/2015).
Counseling Successes and Challenges Quarterly reports from NFMC Program Grantees provide insight into common successes and challenges of foreclosure mitigation counseling. Consistent with the last Congressional report, Grantees continue to report that they achieve the most success as their counseling processes become more efficient, as they improve methods of foreclosure counseling and, to a lesser extent, as they progress in communicating with servicers. Counselors for the NFMC Program continue to report that communicating with servicers remains a significant challenge. Lack of adequate homeowner resources also remains a persistent problem. Grantees indicate that unemployment and underemployment are significant factors in determining a borrower’s ability to qualify for a loan modification, afford modified loans and stay motivated to seek help. Counselors consider rescue funds, various settlement funds and Hardest Hit Funds to be critical tools to assist borrowers at risk of foreclosure. Equally, the use of Hope LoanPort® to streamline the loan modification submission process with servicers is considered an efficient method by many Grantees. Conclusion Foreclosure rates are waning; however, the crisis continues to plague many areas of the country and some local submarkets. The NFMC Program plays a critical role by helping homeowners facing foreclosure find the best mitigation option for their situation. Clients of the NFMC Program are more likely to accomplish the following: cure a serious delinquency or foreclosure with a modification or other type of cure, stay current after obtaining a cure and, for NFMC clients who cured a serious delinquency, avoid foreclosure altogether. Overall, more than 1.9 million at-risk homeowners have been assisted by the NFMC Program, including services provided to racial and ethnic minorities and low-income homeowners in the states with the highest percentage of the nation’s serious delinquencies and foreclosures. Counselors across the country continue to provide foreclosure mitigation assistance to homeowners with these funds.
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Introduction Congress created the National Foreclosure Mitigation Counseling (NFMC) Program to address the mortgage foreclosure crisis by increasing the availability of foreclosure counseling and strengthening the capacity of the nation’s counseling agencies. The NFMC Program was created by the Consolidated Appropriations Act of 2008 (P.L. 110-161), and Congress has authorized $853,185,000 to the program since its inception. The legislation named NeighborWorks® America (as authorized by the Neighborhood Reinvestment Corporation Act, 42 U.S.C. 8101-8107) as administrator of the program. NeighborWorks submits this report to Congress to update its members on the status of the NFMC Program. From February 26, 2008 through July 31, 2015, the NFMC Program achieved the following:
Provided foreclosure prevention counseling to 1,950,781 homeowners in all 50 states, the District of Columbia, and the U.S. territories. Awarded more than $762 million in grants to 198 HUD-Approved Housing Counseling Intermediaries (Intermediaries), State Housing Finance Agencies (HFAs), and NeighborWorks organizations (NWOs) to fund foreclosure counseling and legal assistance to homeowners at risk of foreclosure. Provided 14,477 scholarships for classroom training to housing counselors and other eligible staff from qualified nonprofit 501(c)(3) organizations. In addition, 10,962 certificates of completion have been earned for three foreclosure-related online courses created using NFMC Program funds — 7,105 of which were funded through NFMC Program scholarships. The NFMC Program strengthened housing counseling organizations and enhanced their capacity through grant funds that helped them create improved methods of foreclosure counseling, communicate more effectively with mortgage servicers, make process improvements including streamlining the counseling intake process to better manage the demand for services, and develop creative strategies to better reach homeowners in need.
In September 2014, The Urban Institute completed a 4-year evaluation of Rounds 3 through 5 of the NFMC Program covering clients served from July 2009 to June 2013. The outcomes for these clients were observed through June 2013. The Urban Institute report found that counseled homeowners were more likely to cure a serious delinquency or foreclosure with a modification or other type of cure (such as short sale or deed-in-lieu), stay current after obtaining a cure, and avoid foreclosure altogether. This report provides details on how NFMC Program funding has been used for counseling services, training and legal assistance. It also presents the results of the Urban Institute’s most recent evaluation report, which provides insight into the program’s outcomes, discusses the successes and challenges reported by Grantees, and highlights several client stories that illustrate how the NFMC Program has successfully assisted at-risk homeowners. Additional information and more detailed data analysis can be found in the separate Appendix document, which is described at the end of this report and available on NeighborWorks’ website at www.neighborworks.org/2016NFMCAppendix. This report covers activity from Rounds 1 through 9 of the NFMC Program as of July 31, 2015, except as otherwise indicated.
Funding Summary As of December 18, 2015, there have been ten Congressional appropriations to fund the NFMC Program, with 10 corresponding funding rounds administered by NeighborWorks.
Round 1: The original legislation that created the NFMC Program appropriated $180 million to the effort. NeighborWorks awarded over $130.4 million of these funds to 143 applicants on February 24, 2008, and held the balance to be awarded once performance and need were assessed.
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Round 2: On July 30, 2008, the Housing and Economic Recovery Act of 2008 (P.L. 110-289) appropriated $180 million to the NFMC Program, including $30 million for legal assistance. On December 3, 2008, $177.5 million of these funds, including carryover from Round 1, were awarded to 135 applicants for counseling efforts, and $25.1 million in legal assistance funds were awarded to 54 applicants. Round 3: On March 11, 2009, the Omnibus Appropriations Act of 2009 (P.L. 111-8) allocated $50 million to the program. With this appropriation and funds recaptured or de-obligated from Round 1, NeighborWorks awarded nearly $48.2 million to 124 applicants on October 1, 2009. Round 4: On December 16, 2009, the Consolidated Appropriations Act of 2010 (P.L. 111-117) provided an additional $65 million to the program. With this appropriation and funds recaptured or de-obligated, NeighborWorks awarded $59.5 million to 135 applicants on April 16, 2010. Round 5: Effective April 15, 2011, the Department of Defense and Full Year Continuing Appropriations Act, 2011 (P.L. 112-10) appropriated $64.87 million to the NFMC Program (funded at the FY 2010 level less 0.2 percent). With this appropriation and funds recaptured or de-obligated, NeighborWorks awarded nearly $69.5 million to 144 applicants. Round 6: On November 18, 2011, the Consolidated and Further Continuing Appropriations Act of 2012 (P. L. 112-55) appropriated $80 million to the program. With this appropriation and funds recaptured or deobligated, NeighborWorks awarded $73.87 million to 138 applicants on March 19, 2012. Round 7: On March 26, 2013, the Department of Defense, Military Construction and Veterans Affairs and Full-Year Continuing Appropriations Act of 2013 (P.L. 113-6) appropriated more than $75.81 million to the program. This amount included a 5 percent cut from the prior year as part of the sequestration. With this appropriation and funds recaptured or de-obligated, NeighborWorks awarded more than $70.1 million to 121 applicants on April 15, 2013. Round 8: On January 17, 2014, the 2014 Omnibus Appropriations bill (P.L. 113-76) appropriated $67.5 million to the program. With this appropriation and funds recaptured or de-obligated, NeighborWorks awarded $63.1 million to 117 applicants on March 18, 2014. Round 9: On December 14, 2014, the Consolidated and Further Continuing Appropriations Act of 2015 (P.L. 113-235) appropriated $50 million to the program. With this appropriation and funds recaptured or deobligated, NeighborWorks awarded $44.8 million to 111 applicants on March 13, 2015. Round 10: On December 18, 2015, the Consolidated Appropriations Act, 2016 (P.L. 114-113) appropriated $40 million to the program. NeighborWorks plans to make grant awards in the late spring of calendar year 2016.
Figure 3 below shows NFMC Program appropriations from Congress by fiscal year. Figure 3: NFMC Program Appropriations by Fiscal Year $400
$360.0
$300
Millions
$200 $100
$50.0
$65.0
$64.9
$80.0
$75.8
$67.5
$50.0
$40.0
$0 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 Note: Appropriation amounts are rounded in fiscal years 2011, 2013, and 2014. The actual amounts are $64,870,000, $75,820,000, and $67,500,000 respectively.
Through nine funding rounds, 198 Intermediaries, HFAs and NWOs continue to provide foreclosure counseling and legal assistance to the nation’s homeowners. Some Grantees allocate their funding to Sub-grantees, which are National Foreclosure Mitigation Counseling Program Congressional Report Page 6
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subject to the same compliance and reporting requirements as the primary Grantee. In total, over 1,700 national, statewide and local organizations have provided counseling through this program. The following sections provide information about the use of NFMC Program funds in Rounds 1 through 9. Additional details are available in the Appendix.
Counseling Services Grants The details of counseling awards to Grantees by organization type are shown in Table 1. Table 1: Counseling Services Grant Requests and Awards in Funding Rounds 1 Through 9 Number Funded
Amount Requested
Amount Awarded
Intermediaries
25
$971,011,414.50
$426,212,364.50
State Housing Finance Agencies
40
$451,141,279.68
$238,509,555.00
NeighborWorks organizations
133
$145,438,566.00
$72,402,521.00
198
$1,567,591,260.18
$737,124,440.50
Total
Source: NFMC Program reported data (as of 7/31/2015). Note: Starting in Round 2, NeighborWorks imposed caps on the amounts requested, so these requests may not accurately reflect demand.
Counseling services provided by NFMC Program funds are categorized by “level” depending on the counseling activities involved. For example, a basic-level counseling session (referred to as Level One) includes helping the client develop a budget and action plan to avoid foreclosure, with the client then executing the plan. Advanced-level counseling (referred to as Level Two) generally provides hands-on assistance to help the client meet the goals defined in the action plan. Because individual NFMC Program clients may receive one or both levels of counseling services, and to account for cost differences in providing different service levels, they are tracked separately and referred to as “units” of produced counseling. To facilitate compliance with the Making Home Affordable (MHA) Program’s Home Affordable Modification Program (HAMP), a separate level designation (Level Four) was established for NFMC Program counseling related to homeowners that have received HAMP trial modifications but have high debt-toincome ratios. The NFMC Program has awarded Grantees 2,755,689 units of foreclosure counseling through nine funding rounds. Grantees have delivered 2,514,268 counseling units in total, as of July 31, 2015. Table 2 shows the counseling units awarded and delivered by funding round. It is projected that 183,582 counseling units will be delivered in Round 9. Units Awarded, as shown in this table, reflects the actual performance of active Grantees participating in each program round. The awarded units may have been adjusted after execution of the grant agreement to reflect actual performance.
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Table 2: Total NFMC Program Counseling Units Awarded and Delivered in Rounds 1 Through 9 Funding Round Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 Round 9 Total
Units Awarded 459,128 587,846 192,330 234,787 274,343 294,953 283,855 245,412 183,035 2,755,689
Units Delivered 475,118 573,635 186,824 223,367 266,068 273,767 268,760 230,065 16,664 2,514,268
Source: NFMC Program reported data (as of July 31, 2015).
The total number of counseling units provided throughout the course of the program is larger than the specific number of individual clients/homeowners served because many clients received more than one level of counseling. The 1,950,781 homeowners who received foreclosure mitigation counseling through the NFMC Program as of July 31, 2015 received 2,514,268 units of counseling. This production includes counseling associated with the Home Affordable Modification Program (HAMP). This report describes counseling delivered through July 31, 2015 only. Round 9 awards were announced on March 13, 2015, and so only a portion of Round 9 counseling has been reported to date. The Round 9 performance period runs through December 31, 2015. However, as with past rounds, the NFMC Program has offered Grantees a 6-month extension to complete performance. Additional information on the delivery of counseling units is provided in the Appendix.
Counselor Training and Information Sharing Over the course of the NFMC Program, more than $32.3 million has been dedicated to helping counselors and counseling agencies build their capacity to assist homeowners through training and information sharing efforts. These efforts mainly include foreclosure-related training opportunities, which are supplemented by online information-sharing and peer learning tools. The improved capacity of counseling agencies to provide effective counseling and fulfill grants could be an important legacy that outlasts the NFMC Program. Training Thousands of nonprofit professionals and counselors look to NeighborWorks every year for training in homeownership, financial education, community lending and post-purchase counseling. The NFMC Program’s training funds are utilized to expand NeighborWorks’ foreclosure-related training opportunities for housing counseling agency staff. These opportunities include offering additional regional and local training courses, increasing the number of courses available at the national NeighborWorks Training Institutes (NTIs), providing scholarships to housing counselors and other housing counseling agency staff members to attend training events, and developing online courses that counselors and staff can complete at their convenience. As of July 31, 2015, 14,477 scholarships have been provided for classroom training. In addition, 10,962 certificates of completion have been earned for three foreclosure-related online courses developed using NFMC Program funds, and 7,105 of these certificates were funded through NFMC Program scholarships. Training is available to housing
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counselors of qualified nonprofit 501(c)(3) organizations, nonprofit board members and staff. Additionally, municipal, state and federal staff, Congressional staff, and staff of federally elected officials have access to training. The scholarship eligibility requirements for NFMC Programfunded training activities are as follows:
Stephanie Noel College Park, Maryland
When Stephanie Noel was furloughed from her government job and her unemployed ex-husband could no longer provide child-support payments, she knew she might have trouble affording her $2,000 per month mortgage payment. Noel had invested heavily in home improvements and had two sons in a private school.
Participants must be staff members of a qualified nonprofit 501(c)(3) organization. This includes HUDapproved housing counseling agencies (including affiliates of Intermediaries or HFAs and locally approved housing counseling agencies) and others who may not be approved by HUD. Board members of a qualified 501(c)(3) may submit scholarship applications on a limited basis. Lists of eligible organizations are prepopulated and consistently updated in NeighborWorks America’s scholarship system. When employment is in question, NeighborWorks requests employment verification from the organization. Every new organization that applies for a scholarship is researched in at least two IRS-qualified nonprofit verification websites to confirm that the organization is registered as a 501(c)(3). Organizations and staff must be providers of foreclosure prevention or mitigation counseling activities and/or working toward providing foreclosure counseling activities. When in question, NeighborWorks requests verification from the organization regarding its counseling activities. Training is also made available to staff of state and local municipalities, some offering direct services, Congressional staff, and staff of federally elected officials. Effort is made to distribute scholarships to multiple organizations so that many different communities benefit. Other parties wishing to take a course at a NTI (for example, employees of private financial institutions) may enroll and pay market rate for their tuition and all other expenses. This is not an option at Place-Based Training events.
From the NFMC Program’s commencement through July 31, 2015, training funds have enabled NeighborWorks to provide housing counselors with scholarships to support the following:
Bombarded by advertisements from companies offering to lower her payments by refinancing, Noel jumped at one that sounded like a “great deal.” However, although the offer decreased her monthly payments by a nominal $200, an increase in property taxes quickly wiped out the savings. And, she later discovered, the refinancing made her ineligible for the Home Affordable Modification Program. Noel did the right thing—she sought help, by calling the state HOPE (Home Owners Preserving Equity) hotline, eventually being referred to Housing Initiative Partnership (HIP). Initially, her servicer claimed that “nothing can be done until you’re two months behind.” Noel decided to wait, but in hindsight wished she had been more assertive with questions. Instead, she stopped making her payments for two months, triggering what became more than three years of harassment from her lender. “I was refused modification, and although I resumed my payments with my father’s help, I was always two months behind,” Noel recalls. “I began referring to my ‘mortgage monster,’ and became nearly crippled with depression.” With the tension unbearable, Noel returned to HIP and her counselor took charge with the servicer. A 60page modification application was filed, and after follow-up by the counselor, Noel received a trial modification that lowered her monthly payment by $600—in just under a month. “It was so quick I could barely believe it,” says Noel. A year later, Noel remains current with her payments. She still struggles to make ends meet, but her credit score has improved dramatically and she now thinks she might be able to get a second job. She is now considering a financial capability “bounce-back” program offered by HIP. “It didn’t seem like my situation was as bad as the other participants’ at the time, so I didn’t think I fit in,” Noel recalls. “I now know there are a lot of ways through which I could become even more stable.”
30 national NTIs. 39 Regional Multicourse Place-Based Trainings. 102 Place-Based Trainings conducted in partnership with Intermediaries and/or HFAs.
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These training opportunities have occurred in 39 states, with attendees from all 50 states, the District of Columbia and Puerto Rico. The three e-learning courses that were created with NFMC Program funding have also helped counselors and counseling agencies meet the demands of their jobs. The courses—Foreclosure Basics, Understanding and Applying Foreclosure Intervention and Loss Mitigation Tools, and Using Effective Practices to Improve Your Foreclosure Counseling Program—are available free of charge to staff of NeighborWorks organizations; Intermediaries and their Sub-grantees; HFAs and their Sub-grantees; HUD-Approved Housing Counseling Agencies; staff of states, municipalities, Congressional staff; federally elected officials; and staff and board members of qualified nonprofit 501(c)(3) organizations. These participants must pass an exam at the end of the online course to receive a certificate of completion. Information on previous training events, locations, and scholarships, as well as counselor feedback on the NFMC Program training activities, can be found in the Appendix. Information Peer-Sharing Tools NeighborWorks provides a private website for the NFMC Program (www.nfmcmembers.org) that allows counselors to share information, receive updates on foreclosure-related matters, and provide feedback to NFMC Program staff about servicer programs and other items. A key component of the site is a message board that allows counselors to discuss issues with their peers. Conversations typically pertain to servicer communication, counseling delivery methods, potential workout options and assistance for clients that have been denied loan modifications or have fallen prey to loan scams. The NFMC Program members’ website was completely revamped in 2012 to help counselors better navigate the site. The site now highlights NFMC Program counseling agencies in a featured member section on a monthly basis and lists best practices on topics such as working with servicers. A monthly newsletter is sent to Grantees via the site to ensure critical updates reach them directly. The site is an efficient way to reach NFMC Program counselors and to tap into their knowledge about homeowner concerns and national and regional trends. For example, in recent months, the site has been used to achieve the following:
Provide updates on Consumer Financial Protection Bureau mortgage resources and timing of mortgage disclosure rule development; Share blog posts on topics of interest, such as the impact of the foreclosure crisis on renters and housing cost burdens of senior citizens; and Notify counselors of training opportunities for U.S. Department of Housing and Urban Development housing counseling programs.
As of July 31, 2015, the NFMC Program website had 13,620 active users. The message board has hosted 1,078 conversations with 6,659 comments posted since January 2009. The members’ website also serves as a valuable resource for counselors by providing tools such as compliance templates, reporting documents, webinars and servicer contact information. The NFMC Program also provides webinars to share information, clarify program policies and procedures, and facilitate peer learning. There are two webinar series that generally occur monthly. One is a program webinar that provides announcements, industry news and information relevant to foreclosure counseling. Some of these sessions include presentations by third-party experts in government and industry. Other sessions may include peer-learning presentations by NFMC Grantees with specific expertise or best practices to share. The second recurring webinar series is a monthly quality control and compliance webinar that addresses topical issues on counseling production, grant disbursements, and compliance reviews. Additional webinars are held on occasion when the need arises.
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As of July 31, 2015, the NFMC Program has provided 171 webinars between January 2012 and July 2015. These webinars included 39 monthly program presentations, 28 quality control and compliance sessions, 53 technical training events, and 51 peer-sharing and other webinars. Lastly, the NFMC Program publishes a monthly newsletter on the NFMC members’ site to announce events such as webinars and training opportunities, provide reminders on program policies and procedures, and share important industry news. Providing information in multiple formats helps to disseminate information to Grantees as broadly and quickly as possible.
Partnering to Facilitate Foreclosure Counseling
Craig Stram Pleasant Valley, New York
The NFMC Program complements other federal foreclosure prevention programs and leverages established housing counseling networks. Alignment of the NFMC Program and the Making Home Affordable Program NeighborWorks has worked closely with the U.S. Department of the Treasury to leverage NFMC Program counseling services in support of the HAMP component of the MHA program. A separate level designation (Level Four) was established for NFMC Program clients who have high debt-to-income ratios to facilitate compliance with the MHA program’s counseling requirements. NFMC Grantees may use up to 30 percent of their funding to support Level Four activities. As a requirement of Level 1 counseling, all homeowners must be screened to determine eligibility for MHA. The NFMC Program created an MHA checklist to help facilitate this process. In light of Treasury’s Supplemental Directive 13-08 related to the MHA Program’s Borrower Post-Modification Counseling and Servicer Incentives, homeowners who receive a trial loan modification and have either a Government Sponsored Entity loan, or a loan owned or guaranteed by the Veterans Administration, the Department of Agriculture’s Rural Housing Service, or the Federal Housing Administration are eligible to obtain Level Four post-modification counseling from an organization participating in the NFMC Program. Grantees participating as referral agencies receiving compensation for providing post-modification counseling for Fannie Mae or Freddie Mac cannot report those same clients as NFMC Level Four clients. NeighborWorks modified the NFMC Program Level Four counseling requirements so Grantees can continue to use a portion of their funding to support post-modification counseling. For full payment, Level Four counseling requires at least two contacts with the borrower. NFMC Program Grantees report these clients at two separate times. After the first session, the client can be reported at “Level 4a.” Once a follow-up appointment has been completed, the client can be reported at “Level 4b.”
It all started with a good deed. At the same time that Craig Stram was unemployed and his wife’s business was in transition, his diabetic brother-in-law suffered a personal and medical emergency that required a significant loan—one that in the end could not be repaid. In July 2013, the inevitable happened: Stram and his wife fell behind on their mortgage for the first time in 15 years. “I called my lender to explain the situation, naively thinking they would understand and work with me,” says Stram, of Pleasant Valley, NY. “I could not have been more wrong. Instead of putting me in contact with the ‘home preservation team’ they advertise, I began to be harassed by their collections people six or seven times a day. The animosity during a time when my soul was cratered and I was feeling so vulnerable made everything exponentially worse. It was the lowest time of my life and I fell into depression.” Although finance has been his profession for more than 30 years, Stram says he could never have achieved a mortgage modification on his own. In desperation, Stram finally typed “How can I save my home in Dutchess County, NY” into a search engine. “Like it was ordained from above,” says Stram, Hudson River Housing, a NeighborWorks organization, was among the first results listed. “I called, and they lifted me up, gave me hope and led us through every step of the process until we were able to successfully modify our loan terms.” The Strams’ home was saved.
Because individual NFMC Program clients may receive one or both levels of counseling services, and to account for cost differences in providing different service levels, they are tracked separately and referred to as “units” of
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produced counseling. After the first session, the client can be reported as a “Level 4a”. Once a follow-up appointment has been completed, the client can be reported as a “Level 4b”. As of July 31, 2015, 13,511 homeowners with trial modifications had received 17,798 units of Level 4 counseling to help them reduce their debt ratios. Counselors typically work with these borrowers to create an action plan that includes steps to make timely payments on trial loan modifications and a timeline to eliminate unnecessary debt, minimize expenses, increase income and create savings. Figure 4 shows the distribution of NFMC Program clients who received Level Four counseling by age group. Thirtythree percent of clients receiving post-mitigation counseling are age 55 and above. Also, nearly 41 percent of Level Four clients cited loss of income as the primary reason for default. Figure 4: NFMC Program Level Four Counseling Clients, by Age Group
10.4% 8.9% 18-34 35-44
25.4%
22.7%
45-54 55-64 65+
32.6%
Additional information on the counseling provided to HAMP participants through NFMC Program funding is provided in the Appendix.
Urban Institute Evaluation of Program Effectiveness NeighborWorks competitively awarded a contract to the Urban Institute to conduct a 4-year evaluation of the NFMC Program and the impact of foreclosure intervention counseling. All of the Urban Institute’s reports were provided to Congress separately and the previous two were provided as appendices to earlier NFMC Program Congressional reports. In its most recent report on NFMC Program Rounds 3 through 5 (analyzing borrowers who received counseling from July 2009 to June 2012), the Urban Institute updated its analyses and models of program outcomes through June 2013. The analysis is based on a representative NFMC sample of 137,000 loans and a comparison non-NFMC sample of 103,000 mortgage loans. The report evaluates NFMC Program performance through June 2013 with respect to helping counseled homeowners achieve the following three goals: (1) curing an existing foreclosure or serious delinquency, (2) obtaining loan modifications with lower monthly payments than are obtainable without counseling and (3) achieving sustainable loan modifications that avoid re-default and foreclosure. This evaluation confirms that the NFMC Program counseling has made a difference in the following areas:
NFMC Program-counseled homeowners are nearly three times as likely to receive a loan modification cure compared to non-counseled homeowners.
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Loan modifications received by NFMC Program clients resulted in lower monthly mortgage payments than would have been received without the help of the program. On average, the Urban Institute estimated that NFMC Program clients who received loan modifications had their annual payment reduced by $4,980. The Urban Institute estimated the annual savings resulting from loan modifications for NFMC clients at approximately $518 million. Homeowners who received NFMC Program counseling were less likely to re-enter a troubled status after receiving a loan modification cure than homeowners who did not receive NFMC Program counseling. Once cured, NFMC Program-counseled homeowners are less likely to have their loans re-default. This effect is largely attributable to services provided by counselors, such as counseling in budgeting and financial management skills and developing an appropriate solution given the homeowner’s financial conditions. Counselors help homeowners find alternatives to foreclosure when saving the home is not an option, and those homeowners are more likely to obtain a short sale than non-counseled homeowners.
Overall, the Urban Institute evaluation demonstrates that the NFMC Program is having its intended effect of helping homeowners facing foreclosure. This report can be found at http://www.neighborworks.org/HomesFinances/Foreclosure/Foreclosure-Counseling-(NFMC)/Urban-Institute-Evaluation. The positive effects demonstrated in the final report are strong and are consistent with those found in prior analyses of NFMC Rounds 1 and 2.
Foreclosure Counseling by Geographic Area and by Homeowner and Loan Characteristics The NFMC Program data reported by Grantees provide insights into geographic areas where clients are counseled, homeowner and loan characteristics, and reasons for default. Counseling Demographics Provided by Geographic Areas The NFMC Program has provided foreclosure mitigation counseling to homeowners in all 50 states, the District of Columbia and the U.S. territories. Among all NFMC Program-counseled homeowners, the largest numbers and percentages of counseling units were provided to at-risk homeowners in California and Florida. These two states have seen slight decreases in percentage of national foreclosures since the last NFMC Program Congressional report, due to changing patterns in foreclosure. Florida and New York are now the two states with the highest percentages of foreclosures and serious delinquencies (90 days or more delinquent) nationwide. Counseling provided to Florida homeowners through the NFMC Program continues to be somewhat lower in proportion to the state’s share of national foreclosures, in part because many of Florida’s delinquencies and foreclosures are on investment properties. Because only owner-occupants are eligible for NFMC Program counseling, the program did not address the state’s many investment-owned foreclosures. New York remains one of the top 10 states for number of counseling units delivered. According to the National Association of Realtors’ 2015 Investment and Vacation Home Buyers Survey, 37 percent of investment properties sold in 2014 were located in the South, compared to 19 percent nationally. Florida continues to hold one of highest state backlogs of foreclosures in the United States, according to Core Logic’s June 2015 National Foreclosure Report. New York and New Jersey have seen an increase in their shares of national foreclosures since June 2012, with shares of national foreclosures up approximately 5 percentage points for both states. This in part reflects how both states were greatly impacted by the destruction and damage caused by Super Storm Sandy. The adverse impact lingers, and likely has resulted in a delayed impact on delinquency and foreclosure rates. Both states also have a large backlog of foreclosure cases in their judicial systems. According to Core Logic’s June 2015 National Foreclosure Report, New York has the second highest volume of judicial foreclosure cases in the United States—second to New Jersey. Both states have benefited from numerous programs designed to assist distressed homeowners in the aftermath of Super Storm Sandy. So, homeowners in both states have options other than the NFMC Program for foreclosure
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mitigation. These alternative avenues for support may be a reason why New York and New Jersey have not received greater shares than they have of NFMC Program counseling. California and Florida’s share of national serious delinquencies and foreclosures has declined significantly since the December 2012 Congressional report. Serious delinquencies and foreclosures have decreased 4 and 3 percentage points in the case of California, and 5 and 9 points for Florida, respectively. Table 3 shows the details of counseling delivered in each state or territory and their percentages of national serious delinquencies and foreclosures. Table 3: States and Territories Ranked by Percentage of NFMC Program Counseling Delivered and Total Units Delivered, Along with Percentages of National Delinquencies and Foreclosures Number of Units Delivered
Percentage of Total Units Delivered
Percentage of National Serious Delinquencies
Percentage of National Foreclosures
California
381,342
15.17%
6.81%
5.61%
Florida
189,076
7.52%
11.70%
14.18%
Ohio
153,679
6.11%
3.67%
3.64%
Illinois
146,195
5.81%
4.86%
5.24%
Pennsylvania
131,306
5.22%
4.35%
4.33%
Georgia
104,952
4.17%
3.31%
2.27%
North Carolina
102,863
4.09%
2.72%
2.10%
Michigan
97,136
3.86%
1.93%
1.36%
New York
92,285
3.67%
9.02%
11.73%
Maryland
85,375
3.40%
3.32%
3.35%
Texas
77,135
3.07%
4.84%
3.10%
Arizona
75,270
2.99%
1.23%
0.98%
Minnesota
73,545
2.93%
0.95%
0.82%
New Jersey
65,671
2.61%
7.68%
10.35%
Indiana
57,719
2.30%
2.05%
1.98%
Massachusetts
54,771
2.18%
2.24%
1.96%
Tennessee
48,988
1.95%
1.70%
1.06%
Colorado
46,299
1.84%
0.91%
0.74%
Virginia
46,197
1.84%
2.07%
1.38%
South Carolina
42,679
1.70%
1.57%
1.56%
Missouri
40,754
1.62%
1.36%
0.98%
Nevada
37,208
1.48%
1.44%
1.45%
Wisconsin
33,250
1.32%
1.11%
1.06%
Washington
29,156
1.16%
2.21%
2.36%
Kentucky
28,347
1.13%
1.03%
1.01%
Connecticut
27,096
1.08%
1.65%
1.79%
Oregon
24,346
0.97%
1.28%
1.52%
Iowa
23,909
0.95%
0.53%
0.57%
Rhode Island
19,836
0.79%
0.42%
0.37%
State or Territory
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Number of Units Delivered 19,462
Percentage of Total Units Delivered 0.77%
1.38%
Percentage of National Foreclosures 0.90%
Mississippi
17,834
0.71%
0.73%
0.48%
Puerto Rico
14,968
0.60%
1.73%
1.89%
Louisiana
14,809
0.59%
1.30%
1.08%
Delaware
13,965
0.56%
0.51%
0.52%
Oklahoma
8,747
0.35%
0.91%
0.96%
Utah
8,622
0.34%
0.54%
0.39%
New Mexico
8,021
0.32%
0.72%
0.89%
Idaho
7,864
0.31%
0.31%
0.30%
Montana
7,553
0.30%
0.13%
0.11%
Kansas
7,036
0.28%
0.54%
0.50%
New Hampshire
6,700
0.27%
0.31%
0.26%
Arkansas
5,924
0.24%
0.68%
0.54%
Maine
5,823
0.23%
0.48%
0.50%
South Dakota
5,746
0.23%
0.08%
0.08%
Hawaii
5,389
0.21%
0.48%
0.65%
District of Columbia
5,241
0.21%
0.28%
0.37%
Nebraska
4,805
0.19%
0.29%
0.19%
West Virginia
3,713
0.15%
0.26%
0.20%
Vermont
1,962
0.08%
0.14%
0.17%
Alaska
1,703
0.06%
0.09%
0.08%
Wyoming
1,136
0.08%
0.07%
0.05%
North Dakota
754
0.03%
0.04%
0.04%
U.S. Virgin Islands
73
0.00%
Not Available
Not Available
Guam
31
0.00%
Not Available
Not Available
American Samoa Northern Mariana Islands Total
1
0.00%
Not Available
Not Available
1
0.00%
Not Available
Not Available
2,514,268
100%
100%
100%
State or Territory Alabama
Percentage of National Serious Delinquencies
Sources: Mortgage Bankers Association National Delinquency Survey Q2 2015 (as of 6/30/2015) and NFMC Program reported data (as of 7/31/2015).
The Appendix provides additional analysis of NFMC Program penetration into states based on foreclosure and delinquency rates. The Appendix also includes state rankings based on other data points, such as race and Hispanic origin, primary reason for default, loan status and loan type. The statutory authority for the NFMC Program mandates that the majority of the awarded funds be prioritized for use in “Areas of Greatest Need.” These are defined as areas experiencing a high rate of defaults and/or foreclosures. The NFMC Program determines these Areas of Greatest Need through an analysis of MSAs and rural areas using 13 indicators of mortgage loan status. The indicators employ data obtained from industry data sources (e.g. Black Knight Financial Services). Beginning in Round 9, the NFMC Program designated certain MSAs and rural areas as National Foreclosure Mitigation Counseling Program Congressional Report Page 15
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“Areas of Extraordinary Need”—localities with the most severe rates of default and/or foreclosure using the same 13 indicators. NFMC Grantees are directed to use at least 51 percent of grant funds to provide mortgage foreclosure intervention and loss mitigation counseling assistance primarily in the defined Areas of Greatest Need and Areas of Extraordinary Need. The remainder of the grant funds may be utilized outside these areas. The Appendix provides more details about which MSAs and rural areas qualify as Areas of Greatest Need and Areas of Extraordinary Need. Of the total 2,514,268 units of counseling delivered through the NFMC Program, 2,281,620 units (91 percent) have been delivered in metropolitan statistical areas (MSAs), and 232,648 units (9 percent) have been delivered in rural areas. Tables 4 and 5 show the 15 MSAs and 10 rural areas by state where the highest numbers of counseling units were provided. Table 4: Top 15 Metropolitan Statistical Areas for NFMC Program Counseling Units Counseling Units Delivered
Metropolitan Statistical Areas Chicago-Joliet-Naperville, IL-IN-WI
134,749
New York-Northern New Jersey-Long Island, NY-NJ-PA
104,195
Los Angeles-Long Beach-Santa Ana, CA
103,963
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
92,292
Atlanta-Sandy Springs-Marietta, GA
73,347
Washington-Arlington-Alexandria, DC-VA-MD-WV
72,149
Miami-Fort Lauderdale-Pompano Beach, FL
69,635
Riverside-San Bernardino-Ontario, CA
68,387
Detroit-Warren-Livonia, MI
53,657
Minneapolis-St. Paul-Bloomington, MN-WI
52,579
Phoenix-Mesa-Glendale, AZ
51,164
Cleveland-Elyria-Mentor, OH
45,879
San Francisco-Oakland-Fremont, CA
42,668
San Diego-Carlsbad-San Marcos, CA
36,360
Boston-Cambridge-Quincy, MA-NH
31,960
Source: NFMC Program reported data (as of 7/31/2015). Note: Includes Home Affordable Modification Program Level Four.
Table 5: Top 10 States for Delivery of NFMC Program Counseling Units in Rural Areas State
Counseling Units Delivered to Rural Areas
North Carolina
22,851
Puerto Rico
14,946
Minnesota
14,467
Ohio
14,168
Pennsylvania
12,656
Michigan
10,961
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Counseling Units Delivered to Rural Areas
State Georgia
10,820
Indiana
9,256
Iowa
7,987
Tennessee
7,230
Source: NFMC Program reported data (as of 7/31/2015). Note: Includes Level Four (Home Affordable Modification Program) counseling.
Lists of counseling units delivered to all MSAs and rural areas of states are provided in the Appendix. Homeowner Characteristics Of the 1,950,781 homeowners served, the most common NFMC Program client household type is married homeowners with dependents (36 percent), which is consistent with previous Congressional reports. Nearly 22 percent of homeowners identified themselves as single adults, and nearly 16 percent reported being married without dependents. Details are shown in Table 6. NeighborWorks has identified inconsistencies in the way CounselorMax, one of the client management systems used by NFMC grantees for reporting, collected race and ethnicity of NFMC Program-counseled homeowners. The system in some cases misidentified race and ethnic origin of clients, and reported this information incorrectly. NeighborWorks has completed a global audit of this issue. A preliminary analysis of a data sample suggests that the impact of the error is probably minor. Table 6: Household Type Household Type
Percentage
Married with Dependents Single Adult Married Without Dependents Female-Headed Single-Parent Household Other Male-Headed Single-Parent Household Two or More Unrelated Adults
35.9% 21.8% 15.8% 13.4% 6.2% 4.5% 2.4%
Source: NFMC Program reported data (as of 7/31/2015). Note: Includes Level Four (Home Affordable Modification Program) counseling.
Women continue to represent just over half (nearly 52 percent) of all reported NFMC Program clients as shown in Figure 5. Of all NFMC clients, 13 percent identified their household type as female-headed single-parent household.
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Figure 5: NFMC Program Clients by Gender
48.2%
Female 51.8%
Male
Source: NFMC Program reported data (as of 7/31/2015).
White NFMC clients represent 57 percent of all NFMC Program clients receiving counseling services, African American clients account for 26 percent, Asians comprise a little over 3 percent, nearly 12 percent of clients selfreport in the “Other” category or chose not to respond, and just over 1 percent of clients reported being two or more races. Less than 1 percent of clients are American Indian/Alaska Natives. Figure 6 provides the distribution of NFMC Program clients by race, and Figure 7 compares the distribution of program participants with all homeowners. Figure 6: Race of NFMC Program Clients 0.4% 1.1% 3.4%
White
11.8%
African American Asian 26.2%
57.1%
Two or More Races American Indian or Alaskan Native Other/Did Not Respond
Source: NFMC Program reported data (as of 7/31/2015).
Since the program’s inception, the NFMC Program has served African American and Hispanic clients in greater proportions than their corresponding percentages of the number of all U.S. homeowners. According to the U.S. Census Bureau, most U.S. homeowners (84 percent) are white (Figure 7). This racial group is also the largest group seeking NFMC Program counseling, at 57 percent, which is consistent with past Congressional reports. Nationwide, a little more than 31 percent of NFMC Program services were provided to racial minority homeowners, not including clients who chose the “Other” category or did not respond, so the total percentage of racial minority National Foreclosure Mitigation Counseling Program Congressional Report Page 18
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homeowners is slightly greater than Figures 6 and 7 indicate. Twenty-six percent of NFMC Program clients are African American, compared with 8 percent of all homeowners. Figure 7: Percentages by Race of All U.S. Homeowners and NFMC Program Clients 90%
84.2%
80% 70% 57.1%
60% 50% 40%
26.2%
30% 20%
3.4%
8.1%
10%
1.1%
3.8%
1.3%
0.6%
0% White
African American
Asian
All Homeowners
11.7%
0.4%
Two or More American Indian Races or Alaska Native
2.0% Other*
NFMC Program Clients
Sources: U.S. Census Bureau, 2009-2013 American Community Survey and NFMC Program reported data (as of 7/31/2015). *Note: This category includes “Other” and “Chose Not to Respond” as part of NFMC Program client count.
Nineteen percent of clients are of Hispanic origin, compared with more than 8 percent of all homeowners as shown in Figure 8. Figure 8: Percentages by Hispanic or Non-Hispanic Origin of All U.S. Homeowners and NFMC Program Clients 100.0%
91.5% 81.0%
80.0%
60.0%
All Homeowners
40.0% 20.0%
NFMC Program Clients
19.0% 8.5%
0.0% Hispanic Origin
Non-Hispanic Origin
Sources: U.S. Census Bureau 2009-2013 American Community Survey and NFMC Program reported data (as of 7/31/2015).
Thirty-six percent of services went to residents of ZIP codes where the majority of residents are minority, and 7 percent of services were provided in Hispanic-majority ZIP codes. Low-income homeowners, who are identified as residents making less than 80 percent of area median income (AMI), received 67 percent of NFMC Program services. Twenty-six percent of the program counseling was delivered to homeowners living in ZIP codes with the
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majority of residents making less than 80 percent of AMI. Figures 9 and 10 show details of program services provided, by Grantee type, to low-income, Hispanic, and racial minority homeowners and ZIP codes. The racial and minority status demographics of NFMC clients has remained stable, with the percentages of racial minority clients, and clients of Hispanic origin, nearly unchanged since the previous Congressional report. Nonwhite clients, including those who self-identify as “Other,” is unchanged at almost 43 percent since the December 2014 Congressional report. Specific racial groups, such as African Americans and Asians, as well as clients of Hispanic origin are also unchanged in both reports. The race categories “Other” and “Chose Not to Respond” are not included in this analysis because NeighborWorks could not assume homeowners who self-identified as “Other” or who did not identify were or were not classified as a racial minority. “Hispanic Origin” is included as part of the NFMC Program minority data count. Services in majority minority ZIP Codes and services in majority low-income ZIP Codes in U.S. territories are not included because the data is not gathered by ZIP Code in those territories. Figure 9: NFMC Program Service to Low-Income and Minority Homeowners and ZIP Codes by Grantee Type 80.0%
66.1% 72.5% 66.4% 66.7%
70.0% 60.0%
50.0% 40.0%
36.2% 37.2% 35.3% 30.8%
30.0%
43.0% 37.5%
35.8%
33.9%
29.8%
25.5% 25.9%
26.2%
20.0% 10.0% 0.0% Overall Services to Minorities
Services in Majority Minority ZIP Codes
Intermediaries
HFAs
Overall Services to Low- Services in Majority Income Homeowners Low-Income ZIP Codes NWOs
All Organizations
Sources: NFMC Program reported data as of 7/31/2015 and Nielsen 2015 ZIP code estimates.
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Figure 10: NFMC Program Service to Clients of Hispanic Origin and Residents of Hispanic Majority ZIP Codes by Grantee Type 30.0%
26.8%
25.0%
20.0%
18.8%
17.4%
15.0%
Intermediaries
11.5%
10.0%
7.4%
HFAs NWOs
5.9%
5.0% 0.0% Overall Service to Hispanic Homeowners
Services in Hispanic Majority ZIP Codes
Sources: NFMC Program reported data as of 7/31/2015 and Nielsen 2015 ZIP code estimates. Note: Data from U.S. territories are not included in “Services in Hispanic Majority ZIP Codes” because the data is not gathered by ZIP Code in those territories.
NeighborWorks is committed to ensuring that the nation’s racial minority, low-income homeowners and lowincome neighborhoods, which have been disproportionately impacted by the foreclosure crisis, are served by the NFMC Program. Additional data on NFMC Program services provided to racial minority, Hispanic, and lowincome homeowners are presented in the Appendix. Clients’ Loan and Income Characteristics Clients’ monthly PITI payments at the time they enter counseling range from less than $500 to more than $2,000, with 38 percent of NFMC Program clients paying $1,500 or more each month (Figure 11). Figure 11: Monthly Mortgage Payments of NFMC Program Clients
6.1% 21.3%
Less than $500 $500-$999
28.8%
$1,000-$1,499 17.1%
$1,500-$1,999 $2,000 or more 26.7%
Source: NFMC Program reported data (as of 7/31/2015).
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Note: Five percent is trimmed from client-reported income and monthly mortgage principal, interest, taxes and insurance to compensate for Grantee data-entry errors.
A look at mortgage affordability (Figure 12) shows that a large portion of NFMC clients, greater than 31 percent, are spending 30 percent or less to cover PITI. It is encouraging that almost a third of clients have what are commonly considered affordable mortgages. However, 38 percent of clients continue to spend 50 percent or more of their income on PITI. The fact that such a significant portion of clients are applying half their monthly income toward their mortgage illustrates how fragile the finances of NFMC clients can be. Figure 12: Clients’ Percentage of Income Paid to Principal, Interest, Taxes and Insurance
23.2%
30% or Less 31.5%
31%-39% 40%-49%
5.9%
50%-59% 60%-69%
9.2%
70% or More
16.5% 13.7%
Source: NFMC Program reported data (as of 7/31/2015). Note: Five percent is trimmed from client-reported income and monthly mortgage principal, interest, taxes and insurance to compensate for Grantee data-entry errors.
The distribution of NFMC Program clients by share of income paid to PITI has changed over time. The percentages remained consistent through NFMC Round 5. Beginning in Round 6, however, greater proportions of NFMC Program clients hold both the most affordable and the least affordable mortgages. Figure 13 shows the distribution of NFMC Program clients by share of income paid to PITI, for each program round. Starting in Round 6, the clients with the most affordable mortgages (those paying 30 percent or less of their income toward PITI) have increased from approximately 30 percent of clients to almost 40 percent. During the same period, the clients with the least affordable mortgages (those paying 70 percent or more to PITI) have grown as well, from 20 percent in Round 6 to 31 percent in Round 9 (from the information available to date in Round 9).
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Figure 13: Client’s Share of Income Paid to PITI by Round 45%
Percentage of Clients
40%
35% 30% 25% 20% 15% 10% 5% 0% Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 Round 9 30% or less paid to PITI
31%-39% paid to PITI
40%-49% paid to PITI
50%-59% paid to PITI
60%-69% paid to PITI
70% or more paid to PITI
Source: NFMC Program reported data (as of 7/31/2015). Note: Five percent is trimmed from client-reported income and monthly mortgage principal, interest, taxes and insurance to compensate for Grantee data-entry errors.
NFMC Program clients paying shares of income between these two extremes (paying between 31 percent and 69 percent of income toward PITI) have declined. This decline is a result of a distribution shift where the pool of clients increasingly represents the two extremes. The increase in clients paying 30 percent or less of income to PITI is a welcome development, but the rise in clients paying 70 percent or more is a cause for concern. One explanation for the shift toward extremes in mortgage affordability could be the changing profile of homeowners who pursued NFMC Program counseling in Rounds 7 through 9 as compared to those in earlier rounds. Homeowners with the most affordable mortgages have become more proactive in seeking counseling assistance from the NFMC Program, as awareness of the program has improved over time. Homeowners in remaining hard-hit communities, with the least affordable mortgages, have become a growing share of clients as counseling resources increasingly are directed toward them. So, both groups have become growing shares of the pool of NFMC Program-counseled homeowners over time. The sudden increase in both groups starting in Round 7 may coincide with the rise of MHA programs and increasing use of loan modifications as a mitigation tool. Homeowners paying 31 to 69 percent of their income toward PITI demonstrate both need and lower risk of redefault, and so they are common candidates for loan modification. Homeowners paying 30 percent or less are less likely to demonstrate sufficient need to convince servicers to offer modifications. Homeowners paying 70 percent or more represent the greatest risk of re-default, and so they are less likely to receive modifications as well. Both groups become more concentrated in seeking housing counseling to identify solutions other than those offered through the MHA program. In the next analysis, NFMC Program data examine NFMC Program clients by household income over the course of the program. The percentages of clients by income categories have remained relatively consistent over time. A review of data from Rounds 1 through 9 shows that the highest percentage of clients makes less than 50 percent AMI, more than any other income category, which has been steady over the course of the program. Overall, 41 percent of National Foreclosure Mitigation Counseling Program Congressional Report Page 23
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NFMC Program clients have incomes that are less than 50 percent of AMI. However, the percentage of clients making less than 80 percent AMI has declined to 55 percent overall, down from 66 percent from previous Congressional reports. Consistent with the past, 19 percent of clients seeking NFMC Program counseling are making more than 100 percent AMI, showing that foreclosure is affecting a large portion of the population that is not considered low-income. Table 7 shows household income by bracket and funding round. Table 7: Household Income of NFMC Program Clients by Round
Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 Round 9 Total
100% AMI or More
80%-99% AMI
50%-79% AMI
Less Than 50% AMI
16.6% 18.9% 20.4% 18.5% 22.4% 20.2% 19.6% 17.9% 17.4% 19.0%
15.7% 15.9% 13.2% 13.8% 14.5% 13.3% 12.5% 11.8% 11.8% 25.6%
25.5% 26.2% 26.0% 25.1% 27.0% 26.4% 24.3% 23.9% 20.9% 14.3%
42.2% 38.9% 40.4% 42.5% 36.1% 40.1% 43.6% 46.5% 49.9% 41.1%
Source: NFMC Program reported data (as of 7/31/2015).
As shown in Table 8, the majority (nearly 67 percent) of NFMC Program clients in all race categories have household incomes of less than 80 percent of AMI. Among clients with the lowest household incomes, or incomes less than 50 percent of AMI, the largest group was African American at 50 percent, followed by American Indian and Hispanics at 47 percent and 42 percent, respectively. Table 8: NFMC Program Clients by Race and Hispanic Origin and Household Income Race and Hispanic Origin White African American Asian American Indian Two or More Races Other/ Chose Not to Respond Hispanic Origin Overall
100% AMI or More 20.7% 13.2% 24.8% 14.5% 17.3% 22.3% 16.4% 19.0%
80%-99% AMI
50%-79% AMI
15.2% 12.3% 16.1% 13.5% 14.7% 14.4% 14.3% 14.3%
26.3% 24.2% 24.6% 24.3% 27.7% 25.9% 27.0% 25.6%
Less Than 50% AMI 37.9% 50.4% 34.5% 47.6% 40.3% 37.5% 42.3% 41.1%
Source: NFMC Program reported data (as of 7/31/2015).
Reasons for Default and Clients’ Loan Characteristics A reduction in or loss of income continues to be the primary reason for facing foreclosure as reported by the majority of clients. As shown in Table 9, insufficient income was cited in 61 percent of responses about client reasons for default. Seven percent reported facing foreclosure due to medical issues, and another 5 percent reported poor budget management skills as the primary reason for default. Details are provided in Table 9.
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Table 9: Primary Reason for Default Primary Reason for Default
Share of Reasons Given by Clients
Reduction in Income Loss of Income Other Medical Issues Poor Budget Management Skills Increase in Expenses Divorce/Separation Increase in Loan Payment Death of Family Member Business Venture Failed
35.1% 25.9% 12.4% 7.1% 5.6% 4.1% 4.1% 2.8% 1.9% 1.0%
Source: NFMC Program reported data (as of 7/31/2015).
Figure 14 identifies the four most common categories reported for homeowner mortgage defaults. Other reasons contributing to defaults do not occur as frequently as those shown below. Figure 14: Trending Analysis of Primary Reason for Default 80% 70% 60% 50% 40% 30% 20% 10%
2008-Q1 2008-Q2 2008-Q3 2008-Q4 2009-Q1 2009-Q2 2009-Q3 2009-Q4 2010-Q1 2010-Q2 2010-Q3 2010-Q4 2011-Q1 2011-Q2 2011-Q3 2011-Q4 2012-Q1 2012-Q2 2012-Q3 2012-Q4 2013-Q1 2013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q2 2014-Q3 2014-Q4 2015-Q1 2015-Q2
0%
Calendar Year Reduction in or Loss of Income
Medical Issues
Increase in Loan Payment
Poor Budget Management
Source: NFMC Program reported data (as of 7/31/2015).
As shown in Figure 14, the percentage of clients reporting reduction in or loss of income increased rapidly from 41 percent in the third quarter of 2008 to 65 percent by the second quarter of 2009. The percentage has then held relatively steady since then, declining to 55 percent by the second quarter of 2015. From the beginning of reporting to early 2015, the percentage change represents a 34 percent increase over time. This upward trend grew in parallel with the increase in the U.S. unemployment rate from 6.6 percent in October 2008 to a high of 10.1 percent in October 2009. The rate hovered around 9 percent or higher in 2011 and dropped to 5.3 percent in July 2015 (U.S. National Foreclosure Mitigation Counseling Program Congressional Report Page 25
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Bureau of Labor Statistics). The trend in reporting reduction in or loss of income has declined slightly since its peak of 69 percent in the third quarter of 2010, correlating with a declining trend in the unemployment rate over this period. Table 10 shows clients’ loan status at the time of counseling intake. Twenty-eight percent of NFMC Program clients are 30 days to 90 days late on their mortgage when they seek assistance. Thirty-one percent were current on their loan, which is consistent with the last Congressional report. Table 10: Loan Status at Intake Loan Status
Share of Clients 30.8% 16.3% 12.4% 9.4% 31.1%
Current 30-60 Days Late 61-90 Days Late 91-120 Days Late 121+ Days Late Source: NFMC Program reported data (as of 7/31/2015).
Table 11 provides a breakdown of the reasons for default for NFMC Program clients and corresponding delinquency rates by delinquency band (how far behind payments were). Each primary reason for default was evenly distributed across delinquency bands. Table 11: Loan Status by Primary Reason for Default Primary Reason for Default
Current
30-60 Days Late
61-90 Days Late
91-120 Days Late
Reduction in Income Loss of Income Other* Medical Issues Poor Budget Management Skills Increase in Expense Divorce/Separation Increase in Loan Payment Death of Family Member Business Venture Failed
34.5% 18.3% 22.5% 5.0% 6.7% 4.1% 3.1% 3.6% 1.4% 0.8%
38.7% 25.7% 8.7% 7.1% 5.7% 4.9% 3.7% 2.9% 1.7% 0.9%
35.9% 29.7% 7.1% 8.1% 5.3% 4.5% 4.1% 2.5% 1.8% 1.0%
34.6% 31.3% 6.5% 8.3% 4.8% 4.6% 4.5% 2.2% 2.1% 1.1%
121+ Days Late 33.6% 30.2% 8.6% 8.5% 4.7% 3.5% 5.2% 2.1% 2.3% 1.3%
Total 35.1% 25.9% 12.5% 7.1% 5.6% 4.1% 4.1% 2.7% 1.9% 1.0%
Source: NFMC Program reported data (as of 7/31/2015). *Note: The "Other" category includes "Not in Default" which is only a post modification counseling category.
Seventy-four percent of NFMC Program clients report holding fixed-rate mortgages. More than half of all clients (63 percent) report holding fixed-rate mortgages with interest rates below 8 percent, which is an increase of 10 percentage points from June 2012. In 2007, 8 percent was considered the prevailing rate and therefore used as the benchmark to determine whether NFMC clients were obtaining sustainable mortgages. Eight years later, the average interest rate is close to 4 percent. According to the Mortgage Bankers Association National Delinquency Survey, a little greater than 10 percent of mortgages nationwide are adjustable rate mortgages (ARMs) as of Quarter 2 2015. Nearly 21 percent of NFMC Program clients reported holding them, and nearly 7 percent of clients report holding an ARM with an interest rate above 8 percent. Figure 15 shows the breakdown of NFMC Program clients’ mortgage types.
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Figure 15: NFMC Program Clients’ Loan Type 5.6% 6.9% Fixed Under 8% Fixed 8% or Greater
13.9%
ARM Under 8% 10.6%
ARM 8% of Greater
63.0%
Other/Did not Respond
Source: NFMC Program reported data (as of 7/31/2015).
Table 12 shows clients’ primary reason for default correlated to loan type. Reduction in or loss of income are the most common reasons clients with all types of loans are facing default, but this percentage is higher for those holding mortgages with interest rates below 8 percent. Table 12: Primary Reason for Default by Loan Type
Reduction in Income Loss of Income Other* Medical Issues Poor Budget Management Skills Increase in Expense Divorce/Separation Increase in Loan Payment Death of Family Member Business Venture Failed
Fixed Under 8% 35.9% 27.7% 11.4% 7.3% 5.5% 3.9% 4.4% 1.2% 1.8% 0.9%
Fixed 8% or Greater
ARM Under 8%
ARM 8% or Greater
Other
Did Not Respond
32.9% 25.3% 11.7% 9.3% 6.0% 5.2% 4.0% 2.1% 2.5% 1.1%
36.7% 23.0% 15.0% 5.1% 4.7% 3.8% 3.3% 5.6% 1.5% 1.3%
29.5% 21.7% 14.7% 7.0% 5.0% 4.4% 3.1% 11.5% 1.8% 1.3%
27.0% 13.6% 27.6% 6.6% 7.1% 5.5% 3.6% 5.8% 1.7% 1.5%
36.1% 20.7% 13.9% 7.2% 8.9% 4.5% 3.8% 2.0% 2.0% 0.9%
Source: NFMC Program reported data (as of 7/31/2015). *Note: The "Other" category includes "Not in Default" which is only a post-modification counseling category.
Additional data on clients counseled through the NFMC Program can be found in the Appendix.
Counseling Successes and Challenges NFMC Program Grantees described in their quarterly reports the key successes and challenges they face in operating their foreclosure counseling programs. In total, Grantees reported 5,537 successes and 5,528 challenges over the 22 program reporting periods from August 1, 2008 to August 1, 2015.
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Counseling Successes Grantees describe their successes through narrative comments in their quarterly reports. The NFMC Program organizes these diverse responses into four thematic categories:
Creating a More Efficient Counseling Process; Using Specific Effective Counseling Methods; Communicating with Servicers; and Reaching Out to Homeowners in Need.
The most frequently reported overall successes involved making counseling processes more efficient to better manage demand for services (nearly 42 percent of responses). Specific methods of providing effective counseling accounted for nearly 33 percent of all overall successes reported. Grantees also attributed success to communicating with servicers (16 percent) and to reaching homeowners in need (greater than 9 percent of responses). Please see Figures 16 and 18 below for more detail about these categories. Figure 16: Reported Counseling Successes by Category
9.5% Creating a More Efficient Counseling Process 16.0% Effective Counseling Methods 41.8% Communicating with Servicers 32.7%
Reaching Out to Homeowners in Need
Source: NFMC Program reported data (as of 8/1/2015)
Within each of these four categories, Grantee responses addressed more specific success strategies. For instance, the category “Creating a More Efficient Counseling Process” includes such strategies as holding counseling sessions over the phone and establishing a triage system. Overall, the most successful individual strategy is helping borrowers create a budget and action plan to better manage their finances and sustain their loans, which comprised greater than 9 percent of all reported successes. This is consistent with the last few Congressional reports. Grantees also continued to find success through improving their counseling processes by using efficient organizational methods to increase provision and quality of counseling (for example, adhering to appointment times, using standard processes and forms when working with servicers, and using electronic data gathering systems) (nearly 9 percent of successes). The most frequently reported success strategies across all four of the broad categories are shown in Figure 17.
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Figure 17: Individual Success Types Reported 12.0% 10.0%
9.5%
8.8%
8.0%
6.4%
6.2%
6.0%
5.6%
4.4%
4.0%
2.0% 0.0% Create Budget Make Hire and Train Improve Intake Hold and Action Plan Processes More Staff, Expand Process Workshops or Efficient Hours Group Orientation
Follow Up Persistently with Servicer
Source: NFMC Program reported data (as of 8/1/2015).
Several NFMC Program Grantees find ongoing success with particular strategies. For example, Grantees have partnered with local government offices such as a county registry of deeds to identify distressed homeowners who had received notices of intent to foreclose, and marketing the program through community groups and faith-based organizations. Another approach involves combining foreclosure mitigation counseling with financial education. This strategy allows counselors to educate borrowers and provide coaching on short-term and long-term financial goals to meet the client’s needs today and in the future. Trends in Reported Successes There have been 22 NFMC Program reporting periods to date. The most recent reporting periods have brought some changes in which successes are reported most often, as shown in Figure 18 below. This chart shows each category’s relative frequency in reporting in a given period compared to the other categories. All categories remain important, but on a period-by-period basis one may be mentioned less often in favor of another.
“Creating a More Efficient Counseling Process” remained the most reported category of success, although it dropped from 52 percent in the 14th period to 38 percent (see Figure 18) in the 22nd period. It was the most reported category for the 15th through 18th and 20th through 22nd reporting periods. In the 19th reporting period, this category dropped in frequency, but Grantees noted improved efficiency from utilizing Hope LoanPort and internal data-management systems. Hope LoanPort is a web-based platform that allows housing counselors to submit complete modification packages. It was designed to shorten timelines for servicer decision-making and reduce uncertainty surrounding application status and reasons for denial. Hope LoanPort also helps counselors and servicers track client documents and obtain real-time status updates and therefore shortens the timeline for modification submission. Hope LoanPort is now used by over 6,000 housing counselors representing more than 1,100 organizations in all 50 states, the District of Columbia and Puerto Rico. Additionally, Grantees report that rescue funds have also been valuable tools for counselors to help homeowners mitigate foreclosure. “Effective Counseling Methods” is the second most reported category of success overall and has dropped to 33 percent, down from 41 percent in the 19th reporting period. Grantees indicated that consistent success in counseling methods reflects adjustments made in how counselors target and follow up with borrowers, especially with regard to developing borrower budget and action plans and ensuring that clients follow through on those plans. Additionally, Grantees have allocated more resources to better train counselors and have developed more efficient internal tracking systems. The category “Communicating with Servicers” was reported more frequently in the 10th through 12th reporting periods, increasing from 15 percent in the 9th period to 29 percent of responses in the 10th, and
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found renewed frequent mention in the 19th through 22nd periods, at 22 percent and 19 percent of responses respectively. Success in this category stems from establishing consistent points of contact with servicers and deepening the working relationships of counselors with these servicers. Success related to “Reaching Out to Homeowners in Need” was reported at its highest at 15 percent in the 4th reporting period and has remained relatively low over the 15 reporting periods. Since the 15th reporting period, the category has fluctuated between 5 and 12 percent of responses. Most recently, in Period 22, it comprised 10 percent of responses. Figure 18: Trend Analysis of Successful Strategies by Category
60% 50% 40% 30% 20% 10% 0% 1
2
3
4
5
6
7
8
9
10 11 12 13 14 15 16 17 18 19 20 21 22 Reporting Period
Creating a More Efficient Counseling Process
Effective Counseling Methods
Communicating with Servicers
Reaching Out to Homeowners in Need
Source: NFMC Program reported data (as of 8/1/2015).
Patrick Wilde Cranston, Rhode Island In the wake of the Great Recession, part-time, temporary and fluctuating work have become increasingly common. In turn, the resulting cash-flow bottlenecks have wrought havoc on may families’ and individuals’ ability to pay their mortgages and other loans on time. That was the case for union construction worker Patrick Wilde of Cranston, Rhode Island. About half of his colleagues had been laid off, and for the rest, employment had slowed. Wilde said he attempted repeatedly to discuss his escalating financial crunch with his lender, but to no avail. Soon, his home was under water. “I must have tried 10 times over a year to get my lender to engage with me,” Wilde recalls. “First they told me I was earning too much, then they said I have to be working. Finally, I admit it, I was goaded into using a few ‘choice’ words.” As a result, the lender implemented an internal ban returning Wilde’s calls. “I was getting ready to just walk away,” he says. “Even though I had spent thousands on upgrading my house, I was close to giving up and leaving.” At that point, Wilde was more than 90 days and $5,800 behind in his mortgage payments. Fortunately, that’s when Wilde found West Elmwood Housing Development Corporation, a NeighborWorks organization, by searching the HUD website. The nonprofit re-opened communication with the lender and not too long later, negotiated a reduced interest rate and lower monthly payment. “West Elmwood succeeded in getting some action. I wouldn’t have gotten an inch without them,” says Wilde. “My payments still aren’t the easiest to make, but work has picked up and now I can stay afloat.”
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Counseling Challenges Grantees also describe their counseling challenges through narrative comments in their quarterly reports. The NFMC Program organizes these diverse responses into four thematic categories:
Efficient and Timely Communication with Servicers; Homeowner Resources and Interactions; Obtaining Workable Mortgage Solutions; and Counseling Program Administration.
“Efficient and Timely Communication with Servicers” is the most frequently reported challenge category at nearly 38 percent of all responses overall during the NFMC Program, which is consistent with the previous Congressional reports. “Homeowner Resources and Interactions” is the second most reported challenge category at 35 percent over the entire program duration. “Obtaining Workable Mortgage Solutions” and “Counseling Program Administration” were reported less frequently (nearly 16 percent and greater than 11 percent respectively) as shown in Figure 19. While the distribution of challenges has remained consistent overall, they have fluctuated in frequency over time. This is described in the Trends in Reported Challenges section of this report. Figure 19: Challenges by Category
11.3% 15.8%
Efficient and Timely Communication with Servicers 37.8%
Homeowner Resources and Interactions Obtaining Workable Mortgage Solutions
35.1%
Counseling Program Administration
Source: NFMC Program reported data (as of 8/1/2015).
Each category includes a number of specific individual challenges. For example, the category “Efficient and Timely Communication with Servicers” has eight individual challenges. The two most commonly reported challenges are lack of homeowner preparedness and follow-through (more than 10 percent of all Grantee responses) and general difficulty communicating with servicers (greater than 8 percent of responses). The next most commonly reported challenge relates to servicers taking a long time to follow up on their calls regarding case status (also greater than 8 percent). Grantees also have reported that Hope LoanPort usage has helped in this area. Lastly, reduction in income or loss of income leading to default or re-default is a common challenge for counselors (greater than 6 percent). Figure 20 shows the most frequently reported overall challenges across all four broad categories.
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Figure 20: Most Commonly Reported Individual Challenges 10.4% 10.0%
8.5%
8.2%
8.0%
6.5%
6.0%
6.4% 4.9%
4.0% 2.0% 0.0% Lack of General Obtaining a Homeowner Servicer Lack of Insufficient Homeowner Difficulty Timely Experienced a Process Staff Resources Preparedness Communicating Response from Reduction in Consistency and Follow- with Servicers Servicers Income Through Source: NFMC Program reported data (as of 8/1/2015).
The “Homeowner Resources and Interaction” category is a growing challenge for counselors, at 35 percent; its growth is driven by issues such as lack of borrower follow-through and cooperation. Reduction in income due to job loss or underemployment discourages homeowners from seeking assistance. Many homeowners in these situations have other financial responsibilities and are overwhelmed by trying to make ends meet or are embarrassed that they need assistance. This is also a significant issue for counselors in determining a viable mitigation solution, because the homeowner doesn’t know when he or she will secure employment. “Obtaining a Workable Mortgage Solution” is a category of challenges reported less frequently. Overall, confusion surrounding the qualifications and requirements of the MHA Program is the most prominent challenge in this category. It has remained low but consistent, accounting for between 6.5 and 7.4 percent of responses between the 12th and 21st reporting periods. In the 22nd reporting period, it increased to 9.8 percent of responses. This sudden increase may be a result of greater attention to the MHA programs as they begin to wind down. The second most frequent challenge reported in this category, at 3.8 percent, is that resolutions offered by servicers are unaffordable for the borrower. In the “Program Administration” category, several Grantees state their challenges are due to reduced staff, with this comprising 4.9 percent of challenges reported. This category is reported the least often, with issues related to staff burnout and lack of funding for additional staff listed as common challenges. In this category, challenges related to NFMC Program participation remain low across all reported individual challenges due to the longevity of the program and Grantees’ familiarity with its guidelines. Trends in Reported Challenges The rank and proportion of the four categories of challenges have fluctuated over the 22 reporting periods of the NFMC Program, as shown in Figure 21. Similar to the success trends chart (Figure 18), this chart shows each category’s relative frequency in reporting in a given period compared to the other categories. All categories remain important, but on a period-by-period basis, one may be mentioned less often in favor of another.
Reported challenges with “Efficient and Timely Communication with Servicers” grew steadily through 10 periods to a peak frequency of 49 percent of responses, before declining in frequency to 29 percent by the 22nd reporting period. Specific challenges in this category include delayed responses and decisions by servicers and inconsistency regarding industry program policies and servicer requirements.
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“Homeowner Resources and Interactions” remains a significant challenge area, increasing to 50 percent of responses by Period 21 and 46 percent in Period 22, the most recent reporting period. This area surpassed Efficient and Timely Communications with Servicers beginning in Period 17, gaining share largely at the expense of that category. Reductions in borrower income and the inability of clients to adopt revised household budgets undermine borrower morale and impact the effectiveness of counseling. An additional obstacle to mitigating foreclosure is that some clients seek counseling too late in the foreclosure process. Challenges in “Obtaining Workable Mortgage Solutions” have dropped to 10 percent and 15 percent by Period 21 and 22, respectively. Grantees report that borrower unemployment or underemployment, combined with delays in servicer response time, make obtaining a loan modification difficult. The National Mortgage Settlement, Making Home Affordable products, the Department of Justice Settlements and other proprietary programs from Fannie Mae, Freddie Mac and private servicers have provided additional options for borrowers over the last few years. The number of Grantees reporting challenges in “Counseling Program Administration” has continued to remain low at 10 percent in Period 22–only reaching between 5 percent and 13 percent in the last 9 reporting periods. Counselors find they have insufficient staff to meet the demand, and staff burnout has made it difficult to maintain quality staff. Figure 21: Trends in Challenges by Category
60% 50% 40% 30% 20% 10% 0% 1
2
3
4
5
6
7
8
9
10 11 12 13 14 15 16 17 18 19 20 21 22 Reporting Period
Efficient and Timely Communication with Servicers
Homeowner Resources and Interactions
Obtaining Workable Mortgage Solutions
Counseling Program Administration
Source: NFMC Program reported data (as of 8/1/2015).
Legal Assistance Grants The Housing and Economic Recovery Act of 2008 (P.L. 110-289) appropriated $30 million specifically to fund legal assistance for NFMC Program clients with issues related to foreclosure, delinquency or short sale that cannot be handled by their counselor. In December 2008, 54 Grantees received legal assistance awards totaling $25.1 million. Table 13 summarizes the 2008 award of legal assistance funding to Grantees by organization type.
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Table 13: Legal Assistance Applicants and Grants Awarded Number Funded
Amount Requested
Amount Awarded
HUD-Approved Housing Counseling Intermediaries
6
$10.1 million
$10.1 million
State Housing Finance Agencies
23
$10.1 million
$10.1 million
NeighborWorks organizations
25
$5.3 million
$4.9 million
54
$25.5 million
$25.1 million
Totals Source: NFMC Program reported data (as of 12/31/2008).
Grantees were projected to serve 45,000 households. As of July 31, 2015, the program had achieved greater than 105 percent of that goal, with 47,473 clients reported as having received legal services. Due to efficiencies in service and some households requiring fewer hours of legal assistance than projected, Grantees have surpassed the program goal for clients served. The annual progress for NFMC Program legal assistance is shown in Table 14. Table 14: Annual Progress Toward Program Goal Year
Legal Assistance Clients Reported During the Year
Number of Active Grantees on December 31st of That Year
2009
8,053
49
2010
17,442
36
2011
10,903
26
2012
3,504
9
2013
3,869
9
2014
2,507
7
2015 (year to date)
1,195 (as of 7/31/15)
5
Source: NFMC Program reported data (as of 7/31/2015).
As required by Public Law 110-289, the criteria for legal assistance grants gave priority consideration to the MSAs with the highest level of need based on home mortgage foreclosure rates. The 10 states with the most homeowners receiving NFMC Program legal assistance, along with those states’ national ranking by the number of foreclosures, are shown in Table 15. Table 15: Top 10 States for NFMC Program Legal Assistance Funds Ranked by National Foreclosures State
Legal Assistance Clients Reported
National Foreclosures Ranking
California
13,340
4
Ohio
5,422
7
Pennsylvania
5,127
6
Florida
4,746
1
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Georgia
2,395
11
Maryland
2,348
8
South Carolina
2,099
17
New York
1,541
2
North Carolina
1,224
12
Nevada
1,040
19
Sources: Mortgage Bankers Association National Delinquency Survey Q2 2015 (as of 6/30/2015) and NFMC Program reported data (as of 7/31/2015).
The funding for NFMC Program legal assistance included a statutory restriction on civil litigation, which requires that no funds “shall be used to provide, obtain, or arrange on behalf of a homeowner, legal representation involving or for the purposes of civil litigation.” In non-judicial foreclosure jurisdictions, this restriction has meant that attorneys are not able to openly challenge a mortgagee’s legal status and claim in court. In judicial foreclosure states, this has meant that clients whose foreclosure actions have been filed are ineligible to receive legal assistance through the program. This restriction has also had the consequence of restricting NFMC Program legal assistance funds from being used to pay for legal representation at court-ordered mediations and settlement conferences. Clients who are referred for legal assistance may receive multiple services depending on their particular needs. Most often, NFMC Program legal assistance involves the attorney directly advising the client on foreclosure options (76 percent) and reviewing the client’s case file (75 percent). Other legal services most commonly provided are interpreting loan documents, advising counselors on the client’s options and preparing documents for the homeowner. Figure 22 shows the number of clients receiving the various types of legal assistance services each year since program inception. Figure 22: NFMC Program Legal Assistance Services Received by Clients, by Year 20,000 15,000 10,000 5,000 0 2009
2010
2011
2012
2013
2014
Interpreting Documents
Reviewing Case Files
Advising Counselors
Advising Clients
Contacting Servicers
Negotiating
Nullifying Scams
Preparing Documents
Mediation/Arbitration
2015
Source: NFMC Program reported data (as of 7/31/2015). Note: A client can receive more than one type of legal service.
In September 2015, NeighborWorks America discovered that its practice of reallocating legal assistance grant funds among Grantees was not permitted by the Housing & Economic Recovery Act, which made the funds available only for a set period of time (i.e. they were “one-year funds”). As previously reported in NFMC Congressional Reports, some Grantees returned unspent grant funds, which NeighborWorks then re-obligated to high-performing Grantees to continue providing legal assistance under the program. Prior to this discovery, a total of 16 Grantees requested National Foreclosure Mitigation Counseling Program Congressional Report Page 35
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and received $9.3 million in reallocated legal assistance. Five Grantees were still performing with reallocated funds in an extension period up until September 30, 2015, when the program ended. Upon learning that the reallocation of funds was not permitted, NeighborWorks immediately moved to close out the program, return all remaining unobligated legal assistance grant funds to U.S. Treasury, and notify its stakeholders. Additional information about the delivery of legal assistance to homeowners is provided in the Appendix.
Quality Control and Compliance NeighborWorks maintains vigorous quality control standards and Grantee compliance requirements to ensure appropriate use of grant funds. Grantees must provide regular reports and are subject to compliance reviews by a third-party auditor, NeighborWorks’ internal audit team and NFMC Program staff. Additionally, the NFMC Program provides templates, monthly compliance webinars and individual conference calls to help its Grantees meet NFMC Program compliance requirements. Reviews consider delivery of expected services and compliance with program guidelines. Funds not expended by Grantees in the allocated time are de-obligated and/or recaptured and made available for future funding rounds. There are two primary compliance procedures that NeighborWorks conducts for its NFMC Program: the Standard Compliance Review and the Random Client File Review. NFMC Standard Compliance Review The Standard Compliance Review procedures are conducted biennially, test two NFMC Rounds of funding concurrently and are performed by a third-party audit firm, selected through a competitive request for proposal process. The Standard Compliance Review consists of testing programmatic adherence to the NFMC Programs grant agreement, funding announcement and other related program requirements. NeighborWorks employed a riskbased approach to determine which Grantees received an on-site review, which considered the following factors: size of award (combined amount of Round 6 and Round 7), number of Sub-grantees and number of years providing counseling services. A-133 Finding and Litigation Disclosure, percentage increase in service over demonstrated experience, NWO Organizational Assessment Ratio (NWOs only), number of years as a HUD-approved Intermediary (Intermediaries only), most recent participating round production recapture, past performance NFMC (compliance score). Based on prior experience, in FY2014 NeighborWorks modified its Standard Compliance Review testing approach by eliminating onsite reviews for grantees solely selected per the risk rating, due to meeting the “larger grant award” risk factor but that also had no significant reoccurring compliance findings. This allowed NeighborWorks to move these groups to remote reviews and reduce costs associated with the third-party audit firms, travel and internal staff time. All NFMC grantees tested during the Standard Compliance Review received an on-site or remote review. A random selection of three Sub-grantees for each HUD Approved Counseling Intermediary, two sub-grantees for each state Housing Finance Agency (HFA) and two Contracted Counseling Entities (CCEs) for each NeighborWorks organization, if applicable, received an on-site or remote review. The third-party audit firm tested adherence to programmatic guidelines, following agreed upon procedures and used the NFMC Grant Agreement, Funding Announcement and other program documents as its protocol. During the most recent Standard Compliance Review, which tested the Rounds 6 and 7 NFMC grant awards, NFMC conducted 263 on-site and remote reviews. A total of 35 percent of the overall NFMC funding awarded during Round 6 and 7 was tested on-site. Table 16 details the number of compliance reviews by Grantee and review type, including Sub-grantees that received a review for the NFMC Rounds 6 and 7 Standard Compliance Review.
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Table 16: NFMC Program Standard Compliance Review From Rounds 6 and 7 Grantee Type
On-Site Review
Remote Review
Total
HUD-Approved Housing Counseling Intermediaries
2
16
18
State Housing Finance Agencies
5
28
33
NeighborWorks organizations
13
78
91
Sub-grantees
32
89
121
52
211
263
Total Source: NFMC Program reported data (as of 7/31/2015).
NFMC Random Client Review The Random Client File Review is the second compliance procedure and is conducted annually by NFMC Program staff. The NFMC Program has included testing a sample of NFMC client files since 2008. Initially client file testing was included as part of the Standard Compliance Review process and the testing was performed by the third-party vendor. During the NFMC Round 5 grant award, NFMC Quality Control and Compliance staff designed and introduced the Random Client File review as a stand-alone process testing 100 percent of its Grantees, which included a sub-set of its Sub-grantees, Branches, Affiliates and CCEs. Random Client File Reviews test the Grantees, Sub-grantees, Branches, Affiliates and CCEs adherence of the NFMC client file requirements as documented in the NFMC Programs Grant Agreement, Funding Announcement and other related documents. All NFMC Grantees, as well as their applicable Sub-grantees, Branches, Affiliates and/or CCEs are required to comply with the client file requirements and are subject to client file reviews. The NFMC Round 7 Random Client File Review tested all 115 Grantees that were awarded a total of $70,025,586.50 in the Round 7 grant award. Of these Grantees there were 29 HFAs, 17 Intermediaries and 69 NWOs. The NFMC Quality Control and Compliance staff selected a random sampling of client records from all of the Round 7 Grantees that reported records and were subject to testing. The random sampling process captured all direct Grantees and included Sub-grantees, Branches, Affiliates and CCEs that reported records under their respective direct Grantees. Since NFMC Program’s Round 2 grant award performance period, NFMC has integrated the use of a mortgage database that reports mortgage public records data, to validate the existing owner-occupant of single-family, 1-4-unit property statue provision. During the Round 7 Random Client File Review, NFMC introduced the use of the mortgage database for its Random Client File Review process and validated the entire population client files that were tested. NFMC tested 100% of the NFMC Round 7 Grantees (115), during the Round 7 Random Client File Review, the most recent Random Client File Review. If applicable, a random selection of 15 NFMC client files per Grantee that participated in the NFMC Round 7 grant award for a total of 1,724 client files were selected for testing. The population of client files tested represented all files that were reported by the direct grantee, if applicable, and client files reported to the Grantee by its Sub-grantees, Branches, Affiliates and/or CCEs. Table 17 details the number of files tested during the Round 7 Random Client File Review by Grantee type. Table 17: NFMC Program Round 7 Random Client File Review Grantee Type
Grantees Participating in Round 7 Remote Review
Files Reviewed
17
255
HUD-Approved Housing Counseling Intermediaries
National Foreclosure Mitigation Counseling Program Congressional Report Page 37
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Program Administered by NeighborWorks® America May 26, 2016
State Housing Finance Agencies
29
435
NeighborWorks organizations
69
1,034*
115
1,724
Total
*Note: There was one exception to 15 client files being selected for NeighborWorks organizations due to one NWO that reported only 14 records at the time of the client file selection.
Conclusion The NFMC Program helps homeowners facing foreclosure find the best option to mitigate their situation. Clients are more likely to accomplish the following: cure a serious delinquency or foreclosure with a modification or other type cure, stay current after obtaining a cure and, for NFMC Program clients who cured a serious delinquency, avoid foreclosure altogether. Over the course of the NFMC Program, clients have obtained more sustainable mortgages. Many states still have high unemployment rates, and a loss of or reduction in income remains prominent among NFMC Program clients. Foreclosure counselors help homeowners navigate these difficult financial times. Counselors continue to report the challenge of obtaining a timely response from servicers, which can be a barrier to attaining a successful mitigation solution. After just over 8 years, the NFMC Program has grown and adapted to meet changing needs, such as creating an additional level of counseling to support the MHA Program, and increased peer-learning opportunities among counselors. Grantees have also evolved to meet demands. They are reporting high levels of success around creating a more efficient counseling process, improving specific methods of foreclosure counseling and, to a lesser extent, communicating with servicers. Overall, the NFMC Program has assisted more than 1.9 million at-risk homeowners. Services are most heavily provided in states with high percentages of the nation’s serious delinquencies and foreclosures as well as to racial and ethnic minority and low-income homeowners. With NFMC Program funding, counselors have the resources to provide foreclosure mitigation assistance to homeowners across the nation and help them attain the best option when faced with foreclosure.
Appendix Contents The Appendix is a separate document (available online only, at www.neighborworks.org/2016NFMCAppendix) that provides additional information on the following topics:
NFMC Program Counseling Production Summary Counselor Training Counseling Delivery to MSAs and Rural Areas of States Service to Low-Income and Racial Minority Homeowners State-Level Details: Service Delivery and Homeowner Characteristics Legal Assistance to NFMC Program Clients by State Making Home Affordable and the NFMC Program Demographic Client Data Service Delivery Maps
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Combined Rounds 1-9 National Foreclosure Mitigation Counseling Program Number of Counseling Units Delivered Nationally by State
Delivered Counseling Units Over 50,000 20,000 to 49,999 5,000 to 19,999 Source: NFMC Data as of 7/31/2015 Note: Includes Level 4 units related to HAMP counseling
Up to 4,999
Combined Rounds 1-9 National Foreclosure Mitigation Counseling Program Number of Counseling Units Delivered in MSAs Only
Delivered Counseling Units Over 3,500 1,000 to 3,499 500 to 999 Source: NFMC Data as of 7/31/2015 Note: Includes Level 4 units related to HAMP counseling Areas of Greatest Need reflect Round 9 designations
Up to 499 MSA designated as Area of Extraordinary Need MSA designated as Area of Greatest Need
Combined Rounds 1-9 National Foreclosure Mitigation Counseling Program Number of Counseling Units Delivered in Rural Areas of States
WA ME
MT VT WI
MI
CT PA
NV IL
OH
IN
MD WV
CA
VA
KY
AZ
NC
TN NM
SC
AR MS
AL
GA
LA AK
Delivered Counseling Units
FL
Over 3,500 1,000 to 3,499
HI
500 to 999 Source: NFMC Data as of 7/31/2015 Note: Includes Level 4 units related to HAMP counseling Areas of Greatest Need reflect Round 9 designations
Up to 499
XX XX
NH
NY
State designated as Area of Extraordinary Need State designated as Area of Greatest Need
MA
Combined Rounds 1-9 National Foreclosure Mitigation Counseling Program Number of Counseling Dollars Delivered in MSAs Only
Delivered Counseling Dollars Over $750,000 $250,000-$749,999 $100,000-$249,999 Source: NFMC Data as of 7/31/2015 Note: Includes Level 4 units related to HAMP counseling Areas of Greatest Need reflect Round 9 designations
$0-$99,999 MSA designated as Area of Extraordinary Need MSA designated as Area of Greatest Need
Combined Rounds 1-9 National Foreclosure Mitigation Counseling Program Number of Counseling to be Provided in Rural Areas of States
WA ME
MT VT WI
MI
CT PA
NV IL
OH
IN
MD WV
CA
VA
KY
AZ
NC
TN NM
SC
AR MS
AL
GA
LA AK
Delivered Counseling Dollars
FL
Over $750,000 $250,000-$749,999
HI
$100,000-$249,999 Source: NFMC Data as of 7/31/2015 Note: Includes Level 4 units related to HAMP counseling Areas of Greatest Need reflect Round 9 designations
$0-$99,999
XX XX
NH
NY
State designated as Area of Extraordinary Need State designated as Area of Greatest Need
MA
Combined Rounds 1-9 National Foreclosure Mitigation Counseling Program Number of Counseling Units Delivered in Congressional Districts
Delivered Counseling Units Over 6,500 5,000 to 6,499 3,000 to 4,999 Source: NFMC Data as of 7/31/2015 Note: Includes Level 4 units related to HAMP counseling
Up to 2,999
