For people who are not fluent in English, the mortgage application and mortgage servicing processes have been plagued by misunderstanding and in some cases by intentional fraud. As part of the campaign to prevent these problems, housing and civil rights advocates scored a major victory as the Federal Housing Finance Administration (FHFA) has decided to include language preference on the redesigned Uniform Residential Loan Application (URLA). Lenders cannot communicate with customers in the appropriate language unless they know what that preferred language is. By capturing the information in the mortgage application, lenders will know in the beginning what the customer’s language preference is. The redesigned URLA will start being used in July, 2019 and will be mandatory for all loans being sold to Fannie Mae and Freddie Mac in January, 2020. (In practice, this will mean that the redesigned URLA will be used almost universally by that time.) The language preference question will be included on the first page of the URLA in the “personal information” section. The question will be accompanied by disclaimers, including one saying that the loan transaction is likely to be conducted in English. This is a huge win for the large number of advocates who fought for this against significant industry opposition. NHRC worked closely with a broad coalition of advocates including Americans for Financial Reform, UnidosUS, National CAPACD, National Low-Income Housing Coalition, and National Consumer Law Center to push FHFA to take this important step towards ensuring full and fair access to the mortgage origination and servicing processes. It was a three year long effort that at times seemed unlikely to succeed. Congratulations to all those who worked to win this victory!
Eighty housing leaders and supporters crowded into the Realtors top-floor meeting room with a spectacular view of the Capitol building on July 26th and 27th for our national Leaders in Housing Counseling Meeting. Some of the highlights you should know about: We had an encouraging discussion with Adolfo Marzol, Special Assistant to the Secretary at HUD. We proposed discussions with HUD over the next year on how to increase homeownership opportunities and strengthen the FHA mortgage insurance fund by: Increasing public awareness of housing counseling with the help of HUD; Providing incentives to borrowers such as discounting the mortgage insurance premiums for people who complete counseling; Exploring greater availability of downpayment assistance; Referring declined FHA borrowers to counseling agencies; Referring delinquent borrowers to counseling; Exploring payments to counseling agencies for pre-purchase and delinquency counseling work, which improves the performance of the fund. Rep. Charlie Dent and Sen. Bob Menendez received this year’s Champions of Housing Counseling awards for their work with us. Charlie Dent, a senior Appropriations member, promised to push for restoring HUD Housing Counseling back to $55 million in the final budget. On the need to improve marketing and messaging of housing counseling, we had a deep discussion with the Creative Marketing Resources (CMR) people about the high value of housing counseling but low public recognition. They conducted mystery shopping on agencies, which found high levels of expertise and commitment, but entry into programs not always as easy as it should be. More CMR insights: financial incentives to join counseling were highly valued by consumers, call it “anything but counseling,” HUD has value as a good housekeeping seal of approval, and counseling agencies need to do more to appeal to Millennials. After much [...]
NHRC recently conducted a survey of our network of HUD-approved housing counseling agencies to learn more about what mortgage servicing issues counselors are seeing in the field. We aren’t planning to do a formal, but have circulated the responses to give a snapshot. (If you would like to see the responses, please send a request by email to firstname.lastname@example.org.) Fifty-five counselors participated and their responses were thoughtful and specific. Lost documents and repeated submissions were frequent complaints. Difficulty reaching single point of contacts was also a common concern. Transfers continue to be a problem. Successors-in-interest was also a problem. A number of counselors were concerned about the affordability of modifications or an inability to get a modification. Requiring actual late payment rather than imminent default came up repeatedly. On improving the system, counselors would like to work more smoothly with servicers and are baffled why so many servicers do not treat counselors like the helpful professionals they are. There is also ongoing frustration that many servicers do not provide funding for the delinquency work, and with the end of NFMC funding, more agencies will leave the field without a viable funding model.
Fannie Mae, Freddie Mac, and FHFA have created a streamlined mortgage modification, called Flex Mod, to replace HAMP for people who are having difficulty making their mortgage payment. HAMP modifications and many of the non-HAMP alternative modifications were based on the homeowner's income. The Flex Mod streamlined modification is based on amortizing the unpaid loan balances and extending the loan term out for 40 years along with some added features including forbearance. A detailed Flex Mod description is available here. Flex Mod has the advantage of little or no documentation requirements for the homeowner and, at 90 days delinquency, the modification offer is sent automatically to the homeowner. The question we had was "Will a Flex Mod modification that relies primarily on term extension produce a modification that is affordable for the homeowner?" Last November, National Council of La Raza, Empire Justice Center, and NHRC conducted a study comparing 89 actual income based modifications obtained by housing counseling agencies with what the homeowners would have gotten if they received an early version of the streamlined modification. Now, we have the same set of cases and they have run through the actual Flex Mod program, so that we are able to evaluate how affordable the Flex Mod modifications are. In summary, a majority of the cases (57%) received the same or an even more affordable modification than the mod they received originally. Another 9% of the cases were affordable but off by smaller amounts, such as $9 and $15 a month. However, 34% of the cases under Flex Mod required a payment of at least $50 a month extra and 28% of the cases would have a payment of $100 a month or more, which is [...]
Facing declining funding and continuing demand, housing counseling programs need to find and develop new lines of business, which meet the needs of consumers and which can help pay the bills. With that in mind, NHRC has launched a series of Webinars to educate housing counseling managers on innovative programs, which generate income. Here is the list of programs so far. There are many exciting opportunities, which can help strengthen the housing counseling work and benefit consumers. Opportunities created by Certification Rule 3/16/17 Sarah Gerecke, HUD Karin L. Nigol, Housing Education Resource Center, Inc. Marcus Purnell, HomeFree USA Walda Yon, Latino Economic Development Center Andrew J. Loubert, Community Reinvestment Solutions, Inc. Helping Returning Homebuyers with Past Short Sales 4/13/17 Pam Marron, Innovative Mortgage Services Ellie Pepper, Empire Justice Center Pay Day Loan Alternative Loans, CDC of Brownsville 4/20/17 Matt Hull, Texas Association of CDC’s Nick Mitchell-Bennett, CDC of Brownsville Nationwide Mortgage Collaborative 5/4/17 Gabe Del Rio, Springboard CDFI Real Estate Shared Income Partnership, Urban Edge 5/18/17 Bob Credle, Urban Edge Linda Champion, Urban Edge Heat Squad Conservation Program, NeighborWorks of Western Vermont, 6/8/17 Melanie Paskevich, NWWV Profit and Loss Analysis and Fee for Service Pricing, 6/15/17 Bob Credle, Urban Edge Jeff Tellier, Urban Edge Special thanks to NeighborWorks America for their help in identifying many of these models from their network.
The Trump Administration has released its first budget proposal, which would increase defense spending while dramatically reducing non-defense domestic spending, including a reduction of more than $6 billion for the Department of Housing and Urban Development. The proposed cut to HUD would eliminate critical programs, including the Community Development Block Grant (CDBG), the Home Investment Partnerships Program, Choice Neighborhoods, and the Self-help Homeownership Opportunity Program. If carried out, these cut will have a devastating impact on low and moderate income communities. The proposed budget is only an overview of the administration’s budget priorities and does not include funding levels for all programs, including the Housing Counseling Assistance program. The administration is expected to release its full budget sometime around May. In addition to the proposed cuts to HUD, the administration’s proposed budget would eliminate several other program that are important to the housing counseling community and our clients, with NeighborWorks America (the Neighborhood Reinvestment Corporation) and the Legal Services Corporation, being defunded under the proposed plan. NHRC is working with congressional allies to ensure the highest possible funding level for Housing Counseling Assistance. A letter asking members of Congress to support an increase in housing counseling funding, which was signed by 350 counseling agencies, was submitted to congressional offices last week. Additionally, a number of agencies corresponded directly with their congressional offices.
The Home Affordable Modification Program (HAMP) will end at the end of December 2016. The Mortgage Bankers Association (MBA) has proposed a product that would target reducing the household's monthly mortgage payment, by extending the loan term to forty years. Significantly, unlike HAMP, the MBA model would not be based on household income. This is an important reversal from HAMP, because in households where there has been a significant loss of income, the targeted reduction in the monthly mortgage payment may not produce an affordable payment. Additionally, the forty year term extension makes it difficult for the homeowner to rebuild their equity in their home. The Empire Justice Center (EJC), National Council of La Raza (NCLR), and the National Housing Resource Center (NHRC) collected loan information from households who had received HAMP modifications. EJC then analyzed the loan information to compare the modification that was received under HAMP with the modification that would be available under the MBA proposal. You can read the summary of the analysis here, but here are some of the key findings: Targeting the modification to a reduction of the monthly mortgage payment is most beneficial to higher-income households, who are most likely so see a reduction of 20 percent of more, while moderate-income households are more likely to see a reduction of less than 20 percent; Including interest rate reduction as an element of any modification package is critical to ensuring affordable payments, particularly for lower-income homeowners—but this will not be a modification tool available under the MBA proposal; More flexible alternatives to the 480-month term extension are needed for homeowners with significant equity in their homes.
Earlier this month, the National Housing Resource Center sent a letter to members of Congress asking for support for federal housing counseling funding. The letter was signed by more than 360 agencies from nearly every state and the District of Columbia and you can read it here. The letter asked members of Congress to support funding the HUD Housing Counseling Assistance program at $60 M and the National Foreclosure Mitigation Counseling program at $40 M. Sixty million dollars for Housing Counseling Assistance would represent a slight increase over both the current funding level and President Obama's request to Congress ($47 M). Forty million dollars for the NFMC program would keep the program funded at its current level and would be an increase of $40 M over the President's request. At a time when foreclosure continues to be a major issue in many communities, and in which many are seeking to enter the housing market as the recovery takes hold in other communities, there is a critical need for adequate federal funding for housing counseling and we believe an increase in the federal appropriations is strongly warranted. Furthermore, the roughly 45 percent cut in federal funding in President Obama's budget request but do tremendous harm to the ability of housing counseling agencies to meet the needs of people all around the country. Many thanks to all who signed on to the letter.
President Obama's proposed budget will contain a new proposal to “include a $15 million mobility counseling pilot to help families that receive housing assistance through the Department of Housing and Urban Development move to, and stay in, safer neighborhoods with stronger schools and better access to jobs. These investments will be distributed to about 10 regional housing program sites with participating Public Housing Authorities and/or private nonprofits over a three-year period.” The president’s proposed program may be modeled on existing programs in several areas around the country. This will need to make it through Congress, but has the potential to provide opportunities for agencies working with lower income clients receiving Housing Choice Vouchers.
How did programs impacting housing counseling do in the Fiscal Year 2016 federal budget this year? $40 million for NFMC, the National Foreclosure Mitigation Counseling funding (down from $50 million last year). NFMC was zeroed out in the Senate and the House had funded it at $42 million, so we ended up very close to the highest number we could have hoped for and avoided having the program completely defunded. A lot of work from many groups went into preserving this badly needed foreclosure counseling funding. Hats off especially to the many groups working on this, including housing counseling groups in Maine, South Florida, Cleveland, northeastern Missouri, and Fresno, the Community Action Committee of the Lehigh Valley, HomeFree USA, National Council of La Raza, Homeownership Preservation Foundation, and the Coalition of HUD Intermediaries. $47 million for HUD Housing Counseling (same as last year’s funding). This was not a surprise since both the House and Senate had funded at this level, but still good news not to lose funding. HAWK prohibition. Language prohibiting funding from being used for HUD’s HAWK pilot is still included in the bill. HAWK provided reduced mortgage insurance payments for FHA homebuyers who received housing counseling from HUD approved housing counseling agencies. We worked on lifting the prohibition late in the process this year and will start work on this earlier. Hardest Hit Funds. Two billion dollars in unspent Making Home Affordable funds will be reassigned to the state Hardest Hit Funds. The funds will be distributed based on population and on how quickly the state spent their original Hardest Hit Funds. Depending on state priorities, these funds can go to principal reduction programs, blight, and other programs. We have our work [...]
Here is the summary of how the new budget will impact housing counseling: $40 million for NFMC, the National Foreclosure Mitigation Counseling funding (down from $50 million last year). As you know, NFMC had been zeroed out in the Senate and the House had funded it at $42 million, so we ended up very close to the highest number we could have hoped for and avoided having the program completely defunded. A lot of work from many groups went into preserving this badly needed foreclosure counseling funding. Hats off especially to the many groups working on this, including housing counseling groups in Maine, South Florida, Cleveland, northeastern Missouri, and Fresno, Community Action Committee of the Lehigh Valley, HomeFree USA, National Council of La Raza, Homeownership Preservation Foundation, and the Coalition of HUD Intermediaries. $47 million for HUD Housing Counseling (same as last year’s funding). This was not a surprise since both the House and Senate had funded at this level, but still good news not to lose funding. HAWK prohibition. Language prohibiting funding from being used for HUD’s HAWK pilot is still included in the bill. HAWK provided reduced mortgage insurance payments for FHA homebuyers who received housing counseling from HUD approved housing counseling agencies. We worked on lifting the prohibition late in the process this year and will start work on this earlier. Hardest Hit Funds. Two billion dollars in unspent Making Home Affordable funds will be reassigned to the state Hardest Hit Funds. The funds will be distributed based on population and on how quickly the state spent their original Hardest Hit Funds. Depending on state priorities, these funds can go to principal reduction programs, blight, and other programs. One of our strongest [...]
Along with their recently announced HomeReady mortgage program, Fannie Mae also provided a major policy change regarding housing counseling. Fannie Mae will only accept housing counseling provided by HUD-approved housing counseling agencies. This valuable development will mean that the “housing counseling” provided by interested parties in the transaction, most commonly mortgage insurers, will no longer be accepted for Fannie Mae products. Many of us have pressed this issue with their regulator, the Federal Housing Finance Agency, and with Fannie Mae. The perfunctory services provided by for-profit providers were typically delivered after the sales agreement and the mortgage application were signed by the consumer—which meant the major financial decisions had already been made. Next up: Freddie Mac, what are you going to do?
This past February, Julia Gordon from the Center for American Progress was called to testify as an expert witness before the House Financial Services Committee's Housing and Insurance Subcommittee. There were many positive things said about counseling, most notably this quote from Julia: It remains a mystery to me why the entire mortgage industry is not focused like a laser on trying to get housing counseling to every person who’s going to buy a house. This is an incredibly complex transaction that is more money than most consumers will ever spend on anything else in their lifetime and we expect them to just go out in the marketplace to do this for themselves. That just doesn’t make sense when for really, just a very small amount of money, we could significantly increase the success rates of mortgages and do a better job of working with servicers when mortgages get into trouble for some reason, due to a life event.
The Problem with Fannie’s and Freddie’s New 97 Percent LTV Products Last December, Fannie Mae (Fannie) and Freddie Mac (Freddie), announced they would begin purchasing mortgage loans made to borrowers with as little as three percent down. This is an important and generally positive development that will provide a badly needed expansion of credit to well-qualified homebuyers, particularly those who could afford a home but could not or would not take on the additional costs associated with an FHA loan. In a statement endorsing these new loan products, Director Mel Watt of the Federal Housing Finance Agency (FHFA), which regulates Fannie and Freddie, pointed to housing counseling as one of the features that are designed to ensure the safety and soundness of these loans, because housing counseling “improves borrower loan performance.” While research has repeatedly demonstrated that loans made to borrowers who have participated in pre-purchase counseling perform better than loans made to comparable borrowers who have not, the unfortunate reality is that the Fannie and Freddie 97-percent LTV loans do not actually require housing counseling, at least not the counseling that has been studied and shown to improve loan performance. Rather than requiring homeownership counseling, the Freddie product merely requires homebuyer education. The critical distinction is that whereas homebuyer education offers a generic, one-size-fits-all approach, homebuyer counseling works closely with the prospective homebuyers and provides guidance that based on each client’s unique circumstances (e.g., savings, credit score, income). While homebuyer education is undoubtedly valuable, it lacks both the depth and personalization of counseling and has been found to be less effective. For its regular Fannie Mae mortgage product, Fannie has no counseling or education requirement for its 97 to 95 percent LTV applicants. For [...]
NHRC Proposals to Integrate Housing Counseling and Expand Access to Mortgage Credit Last week, the comment period closed for two federal regulations that will impact access to affordable mortgage credit for low- and moderate-income borrowers and the National Housing Resource Center (NHRC) submitted comments that encouraged the agencies to act to expand access to responsible, sustainable mortgage credit. But in line with our mission to integrate housing counseling into the regulatory process, NHRC also made proposals with a housing counseling twist. The Federal Housing Finance Agency (FHFA) solicited public comments in response to its proposed Housing Goals for 2015-17. The Housing Goals set targets for Fannie Mae and Freddie Mac to purchase single family home purchase and refinance mortgages made to low- and very low-income borrowers, as well as for multifamily units that are affordable to low-income renters. NHRC proposed that Fannie Mae and Freddie Mac get extra credit for mortgages on two-to-four unit homes where 1) the home is owner occupied, 2) the owner received housing counseling and 3) the counseling included a landlord counseling component. The extra credit is a 1.25 credit for every mortgage. This extra credit will encourage lenders to guide more people to counseling and encourage owner occupied two-to-four unit lending. Income from the rental units will make the houses more affordable to low- and moderate-income buyers and the counseling will help owners succeed. NHRC also submitted comments last week to the Consumer Financial Protection Bureau (CFPB) in response to proposed changes to the Home Mortgage Disclosure Act (HMDA), which requires financial institutions to publicly report loan and applicant data in order to help determine whether those institutions are meeting the housing needs of their communities in a nondiscriminatory way. [...]