If you’re trying to tackle your mortgage problems alone, you’re 1.7 times as likely to end up in foreclosure than if you seek out a foreclosure counselor.
That’s from a December 2010 study on the National Foreclosure Mitigation Counseling Program (NFMC), which clearly shows your foreclosure counselor should be a key part of your foreclosure team.
As you start looking for one, however, you need to know what exactly they do, what they don’t do, and how to choose one who’s legitimate and qualified.
What a foreclosure counselor does
- Reviews your finances
- Helps you establish a budget
- Explains your non-foreclosure options, such as loan modification, short sale, or deed in lieu of foreclosure; helps you navigate the process with any chosen option
- Advocates on your behalf with lenders and loan servicers.
Counselors should also be up front about discussing their own track records as well as the track records of the agency they work for.
Expect to spend two to 24 hours with a counselor, depending on the complexity of your foreclosure situation, including how many lenders you have to provide documentation to and negotiate with.
Be sure the counselor is looking at your situation holistically—not just at your foreclosure. When counselors focus only on your mortgage, they’re not seeing the whole problem, says Martha Viramontes, director of housing at ClearPoint Credit Counseling Solutions in Los Angeles. Expect an action plan containing the tasks you’ll perform to change your financial situation.
You can get some concrete results by listening to your counselor: The study also showed that home owners who received loan modifications in 2008 and 2009 reduced their monthly payments by $267 more than those who didn’t get counseling.
Study bottom line: Odds of bringing loans current were 53% higher if you received pre-modification counseling than if you didn’t.
What a foreclosure counselor doesn’t do
- Give tax advice
- Give legal advice
- Give guarantees regarding a particular outcome
- Create miracles.
For additional advice, add a tax adviser and attorney to your team.
Finally, “don’t expect a counselor to be a genie,” says Douglas Robinson, a spokesperson for NeighborWorks America, a nonprofit community development corporation in Washington, D.C., that provides foreclosure counseling and administers the NFMC. “If you’re in a home that under the most aggressive scenario you can’t afford, but maybe you got into it because of some toxic loan that should never have been available in the first place, you’re probably going to have to move. It’s best you get out smoothly.”
How to choose an agency
Seek only HUD-approved agencies. HUD makes it easy:
- Type in your state or ZIP code at findaforeclosurecounselor.org.
- Call HUD’s foreclosure counseling hotline at 800-569-4287.
- Call HUD’s foreclosure prevention hotline at 888-995-HOPE (4673).
HUD-approved agencies are all nonprofit, community-based organizations that have administered a housing counseling program for at least a year.
HUD-approved agencies also are required to:
- Employ counselors who are knowledgeable about federal housing programs.
- Have a staff of counselors of which at least half must have two or more years of counseling experience. At least half must also have received housing counseling training in the past two years.
- Provide you with certain documents, such as a privacy agreement explaining how your personal information will be handled.
In addition, at the agency you work with, see if you can find a foreclosure counselor who has certification through the NeighborWorks Center for Homeownership Education and Counseling (NCHEC), which has a Foreclosure Intervention and Default Certification Program. Certified counselors must follow NeighborWorks counseling standards and code of ethics and conduct. They also are required to:
- Have at least one year of experience in foreclosure counseling
- Attend three foreclosure prevention courses.
G.M. Filisko is an attorney and award-winning writer who has seen the sad effects of foreclosure on friends and neighbors. A frequent contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.