HUD STUDIES SHOW HOUSING
COUNSELING HELPS FAMILIES PREPARE
FOR HOMEOWNERSHIP AND KEEP THE HOMES THEY HAVE
FOR HOMEOWNERSHIP AND KEEP THE HOMES THEY HAVE
WASHINGTON – The U.S. Department of Housing and Urban Development (HUD)
today released two reports on the impact of HUD-approved housing counseling has
for those families who purchase their first homes and those struggling to
prevent foreclosure. In both studies, HUD found housing counseling
significantly improved the likelihood homeowners remained in their homes.
Both the pre-purchase counseling and foreclosure counseling studies enrolled
clients in the fall of 2009 and early 2010. HUD found that 35 percent of
participants became homeowners within 18 months of pre-purchase counseling and
only one of those buyers subsequently fell behind in their mortgage payments.
The foreclosure counseling study reveals that with a counselor’s help, nearly
70 percent of those counseled obtained a mortgage remedy to retain their home,
and 56 percent cured their defaults and became current on their mortgages.
“These two studies underscore the need to continue supporting housing
counseling programs across this country, especially during this period when
families need these services the most,” said Raphael Bostic, HUD’s Assistant
Secretary for Policy Development and Research. “The evidence is clear,
with a little investment on the front end, we can go a long way toward
improving the chances families will buy a home they can afford and sustain
their homes in the long run.”
Pre-Purchase Counseling Outcome Study
The “Pre-Purchase Counseling Outcome Study” enrolled 573 individuals seeking
pre-purchase counseling services in fall 2009 from 15 HUD-funded counseling
agencies across the country. The objectives of the study were to examine
the characteristics of pre-purchase counseling clients, the types of services
they received, and whether and under what circumstances they purchased housing
in the 18 months after starting counseling.
While HUD cannot conclude that the study sample is representative of all
pre-purchase counseling clients served by the study agencies, this study
provides a snapshot of some pre-purchase counseling clients at 15 different
housing counseling agencies across the country in the fall of 2009.
The key findings of the study include:
- 35 percent of the study participants had become homeowners 18 months after seeking pre-purchase counseling.
- Most purchasers had a FICO score of 620 or higher (71 percent), and were reported as having completed counseling by their housing counselor (72 percent).
- Only one of the purchasers had fallen at least 30 days behind on mortgage payments 12-18 months after receiving pre-purchase counseling services.
- Most were motivated to seek counseling to identify homebuyer assistance programs (58 percent) or to obtain down payment or closing cost assistance or to qualify for a specific loan program (58 percent).
- Study participants were racially and ethnically diverse (52 percent African American, 32 percent White, 16 percent of another race or multi-racial, and 19 percent Hispanic), were more likely to be young (51 percent were under age 35), female (72 percent), have dependents under the age of 18 living with them (57 percent).
These findings suggest that counseling helped a diverse group of low- to
moderate-income individuals obtain useful information in connection with
preparing to purchase a home and indicate that pre-purchase counseling assists
clients make good decisions regarding homeownership and might help to make
homeownership more sustainable.
Foreclosure Counseling Outcome Study
HUD’s “Foreclosure Counseling Outcome Study” involved conducting baseline
interviews with 824 foreclosure counseling clients, tracking the housing
counseling services they received, and analyzing homebuyer outcomes through an
analysis of credit report data. A follow-up telephone survey was
conducted approximately 18 months after the foreclosure counseling services
were delivered.
About three-quarters of the homeowners who had fallen behind on their
payments did so because of a loss of income, and very few had any savings to
draw upon to pay missed mortgage payments. The study finds that large
shares of counseled homeowners were able to obtain a remedy, retain their home,
and become current on their mortgages. These outcomes were much more
common among homeowners in the study who sought counseling before becoming
delinquent or in the early stages of delinquency (1-3 months).
This study provides information on who accesses counseling services when
facing challenges in paying their mortgage loan, what services those clients
obtain, and identifies the outcomes the clients experienced in the following 18
months (though it cannot assert that the counseling caused the outcomes).
The report’s findings include:
- Most study participants attempted to contact their servicer when they first fell behind but were unsuccessful in negotiating with their lenders on their own.
- With a counselor’s help, 69 percent of counselees obtained a mortgage remedy, and 56 percent were able to become current on their mortgages.
- Nearly 70 percent of clients who sought counseling before becoming delinquent were in their home and current on their mortgage payments at the 18-month follow-up period, whereas only 30 percent of clients who were six or more months behind at the time they entered counseling were in their home and current at follow-up.
The results suggest that counseling can help many homeowners at risk of foreclosure
to negotiate and obtain mortgage remedies, and to become current on their
mortgage payments. In addition, homeowners in the study who were able to
obtain mortgage remedies were more likely to stay in their homes. The HUD
study is also one of the few studies that documents housing outcomes in
relation to specific counseling services received.
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