Foreclosure Mitigation Steps

• Step One:  Assess the Foreclosure Situation
• Step Two:  Reach Troubled Homeowners
• Step Three:  Establish Post-Foreclosure Support Systems
• Step Four:  Stabilize Neighborhoods

Step Two

Reach Troubled Homeowners

A recent Freddie Mac/Roper poll showed that despite increased news media coverage of the foreclosure crisis, almost 57 percent of the nation’s late-paying borrowers still do not know their lenders may offer alternatives to help them avoid foreclosure. The combined stress of being delinquent on their mortgage and the associated problems that caused the financial difficulties can interfere with a homeowner’s ability to strategize and make rational decisions about how to deal with his or her financial crisis.

A critically important service that community leaders can provide to their constituents is to inform them of the necessity of talking with the loan servicer or a qualified housing counselor as soon as they know they are going to have trouble making their payments. The U.S. Department of Housing and Urban Development maintains a searchable database of HUD-approved housing counseling agencies organized by city, state and ZIP code.

Community leaders can also inform troubled homeowners of the many valuable resources at their disposal for addressing their mortgage problems, including refinance options available from the Federal Housing Administration (FHA).

Example of Outreach Effort - A brochure published by the Ottawa County (Ohio) Auditor’s office provides a foreclosure prevention checklist, a directory of national and local help organizations, suggestions on what to do if faced with foreclosure, as well as information about scams.

Communities in foreclosure-impacted areas are taking many approaches to reach troubled homeowners:

• Hosting community workshops, default clinics and TV telethons. ( St. Louis' KETC/Channel 9, the area's public television station, has been joined by 26 community partners to connect people at financial risk to the resources they need. This collaborative community effort is raising awareness of the impact of the financial crisis in the St. Louis region and helping individuals manage their financial challenges through on-air, online and personal assistance. See "Facing the Financial Crisis" web site for more information.)
  
• Publishing flyers in utility bills.
• Posting notices on city websites.
• Airing public service announcements on city cable TV stations.
• Conducting direct mail campaigns to targeted ZIP codes.
• Warning consumers about foreclosure rescue scams.
• Posting links to resources on their organization’s website.

National Community Resources

The Federal Reserve Board hosts a website with links to the latest consumer information on foreclosure from HUD, FHA, IRS and other governmental agencies.

Federal Reserve Consumer Help provides assistance to consumers who would like to file a complaint against a bank or other financial institution, and also provides information and resources on consumer issues. Consumers may also contact Federal Reserve Consumer Help by dialing (888) 851-1920, or via e-mail at: ConsumerHelp@FederalReserve.gov.

NeighborWorks America is a national nonprofit organization created by Congress to provide financial support, technical assistance, and training for community-based revitalization efforts. The Fed is working with NeighborWorks to find ways to stabilize neighborhoods and mitigate the impact of foreclosures and vacant properties on communities. NeighborWorks has created a substantial document, Formula for Success: Questions and Answers for Local Leaders Designing a Foreclosure Intervention Program, providing a wealth of comprehensive information for communities wanting to do more to address local foreclosure issues, including contacting distressed homeowners.

NeighborWorks’ Center for Foreclosure Solutions provides research and reports; resources for counselors, such as training opportunities and predatory lending tips; and marketing resources for helping communities connect to troubled homeowners.

NeighborWorks also administers a national fund established by Congress to increase the availability of foreclosure counseling services in communities of need across the country. The National Foreclosure Mitigation Counseling Program (NFMCP) provided grants to HUD-approved housing counseling intermediaries, qualifying state housing finance agencies and local NeighborWorks organizations to expand their capacity for counseling borrowers at risk of foreclosure.

NMFCP Funds will also be used to train foreclosure counselors by the NeighborWorks Center for Homeownership Education & Counseling through NeighborWorks Training Institutes, regional trainings, place-based trainings in partnership with local intermediaries and housing finance agencies, and the development of an online Foreclosure Basics e-learning course.

The Homeownership Preservation Foundation operates a national foreclosure hotline staffed by trained counselors who can help borrowers assess their situation, set up a mortgage repayment plan and get back on track financially. The service is free and is available in both English and Spanish, 24 hours a day, seven days a week. In addition, callers to 888-995-HOPE can be referred to local nonprofit resources that provide other forms of assistance or additional face-to-face counseling.

Public Service Announcements (PSAs)

NeighborWorks teamed up with the Ad Council to create a national PSA campaign to encourage homeowners at risk of losing their homes to call 888-995-HOPE. The campaign includes television, radio, newspaper, magazine, web, and outdoor advertising, in addition to downloadable tools for direct mail and grassroots marketing.

Creating a Partnership

Another important step in addressing foreclosure issues in your state and community is to join a local homeownership preservation or foreclosure prevention coalition or task force. Or, if there is increased foreclosure activity in your community and no such partnership exists, take a leadership role in creating one.

Key partners in a local foreclosure mitigation task force can include lenders, servicers, regulators, Realtors, housing counselors, city/state/federal government representatives, community-based organizations and faith-based organizations. Successful task forces have been organized by institutions willing to devote the time and resources needed for the ongoing work of the task force.

Hosting Community Events

Consumer Workshops/Clinics

Conducting foreclosure prevention workshops and/or default clinics in community locations such as schools and public libraries has proven successful in helping borrowers avoid foreclosure. There are at least two different models of foreclosure prevention workshops: the mitigation workshop and the default clinic.

Mitigation workshops are typically hosted by a local coalition or task force to give borrowers a chance to meet face-to-face with a counselor and their lender. Workshops are held in a meeting place located near an area of concentrated foreclosure activity. Participating loan servicers send invitations to their delinquent borrowers in area ZIP codes.

Local municipalities post notices of the workshops on their websites and in their public facilities. Local nonprofit counselors are on site to counsel borrowers and assist any borrowers whose lenders are not present. In most cases, lenders and servicers are willing to participate in a summit that is well-designed and well-marketed.

Generally, a local foreclosure coalition or task force will coordinate efforts to provide the meeting space and marketing for the event. It is important to be aware that these workshops are already taking place across the country and one may be scheduled in your community that you can support. Freddie Mac maintains a national calendar of consumer outreach events. To receive the most recent version of this calendar and add your local events, send an e-mail to borrower_outreach@freddiemac.com, or visit http://www.freddiemac.com/avoidforeclosure/workshops.html.

Default clinics are often hosted by nonprofit credit/housing counselors as a way to triage distressed borrowers and streamline the default counselors’ time. This model helps the clients self-select the appropriate assistance needed. Family Services of Charleston, S.C., has put together a useful presentation on how to set up a default clinic.

HOPE NOW Alliance

This national partnership includes over 25 lenders, loan servicers and counseling organizations dedicated to preserving homeownership and minimizing foreclosures. The HOPE NOW lender members have agreed to a uniform set of procedures and guidelines designed to increase outreach to troubled borrowers and reduce foreclosures.

HOPE NOW has partnered with NeighborWorks America to conduct homeowner workshops in cities across the U.S.

• The HOPE workshops provide opportunities for borrowers to meet face-to-face with their lender and local nonprofit housing counselors to develop a workout solution that can help the borrower stay in their home.
• Extensive marketing and media precedes the workshops, and any homeowner facing difficulty or anticipating trouble with mortgage payments is invited to attend.
• Participating lenders and servicers mail invitations to their delinquent borrowers in the area.

Facilitating Communication Between Lenders/Servicers and Counselors

Some homeowners have reported frustration because of a disconnect between lenders/servicers and counselors. Local efforts can be effective in facilitating interaction between different agents in the mortgage industry.

The Federal Reserve Bank of Philadelphia hosted a meeting of servicers and counselors recently that included formal presentations as well as breakout sessions where counselors could meet individually with loan servicers to discuss issues and problems. View the agenda.