The Housing Assistance Program of Essex County, Inc., announced the results of new research on the effectiveness of NeighborWorks pre-purchase housing counseling and education.
It shows that homebuyers who received such advice were one-third less likely to fall behind on their mortgages 90 days or more, two years after taking out the loan, compared to homebuyers who didn’t receive similar counseling and education. The research was done for NeighborWorks America, a national nonprofit affiliated with HAPEC, by Neil Mayer and Associates and Experian, and is based on approximately 75,000 mortgage loans originated in 2007, 2008 and 2009.
“Mortgage delinquency and foreclosure rates continue to be stubbornly high throughout the country,” Alan Hipps, HAPEC Executive Director, said. “This new research clearly tells us what works to help families with their housing issues ahead of time, staving off family stress, financial difficulties and costs that are borne by neighbors and the municipalities,”
The research findings have important implications for HAPEC and the entire housing counseling and education industry.
“While we have long known anecdotally that pre-purchase housing counseling and education provided by certified professionals at the Housing Assistance Program is effective, this research confirms that we are helping to establish homeowners who are less likely to default.” said Hipps.
The research could also become an important tool for lenders in the Adirondacks. Homebuyers who receive NeighborWorks pre-purchase housing counseling and education are less likely to be 90 days or more past due on their mortgage. The likelihood of foreclosure or other default related costs are reduced, which has a direct bearing on a lender’s or servicer’s bottom line.
“Lenders appreciate our homebuyer program and the homebuyer education since the customers they receive from these programs are more knowledgeable and ready to purchase within their limits, know the expenses involved, are more likely to maintain their homes, and know where to find banks, realtors, and service vendors,” said Penny Daniels, a HAPEC Housing Counselor.
“Supporting pre-purchase housing counseling by certified staff affiliated with NeighborWorks organizations like ours, is a win-win for the homebuyer, the mortgage industry, and the communities in which these families live” said Hipps.
The NeighborWorks America research shows how a small investment up-front, that finances the availability of pre-purchase housing counseling and education can help homeowners avoid financial losses by potentially avoiding serious delinquency. Such delinquencies have a good chance of extending into foreclosure. Housing counseling can help prevent disruption of family life and help keep communities stable that might otherwise be hurt by home foreclosure.
Estimates vary, but total losses due to foreclosure borne by local governments, servicers and households can exceed $50,000 per foreclosure, according to a report from the Joint Economic Committee of the U.S. Congress. These losses include bank administrative costs, lost property taxes, unpaid utility bills, property upkeep and lost water and sewer payments.
According to the Mortgage Bankers Association National Delinquency Survey for the fourth quarter of 2012, the percentage of residential mortgage loans 90 days or more past due across the country was 6.78 percent, and 3.74 percent of homeowners nationwide were in foreclosure. By providing NeighborWorks pre-purchase housing counseling and education to more consumers, it’s likely that tens of thousands of the more than 1.5 million homeowners who received a default notice in 2012 may have been able to avoid entering foreclosure.
Interestingly, the NeighborWorks America research shows that even repeat homebuyers benefit from receiving NeighborWorks pre-purchase housing counseling and education. According to the report, repeat homebuyers who received the services also are about one-third less likely to fall 90 days or more behind in their mortgages than repeat homebuyers who didn’t receive NeighborWorks pre-purchase housing counseling and education.
“More analysis of the data is required to determine the factors for the repeat homebuyer results,” said NeighborWorks America CEO Eileen Fitzgerald. “But one thing is clear from the data: housing counseling is effective, even if you’ve been a homeowner before.”