The National Foreclosure Mitigation Counseling (NFMC) program is a special federal appropriation, administered by NeighborWorks® America, that is designed to support a rapid expansion of foreclosure intervention counseling in response to the nationwide foreclosure crisis. This report presents the results of preliminary analyses that attempt to measure the effects of the NFMC program on counseled homeowners. Overall, our analysis suggests that the program is having its intended effect of helping homeowners facing loss of their homes through foreclosure.
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The National Foreclosure Mitigation Counseling (NFMC) program is a special federal appropriation, administered by NeighborWorks® (NW) America, that is designed to support a rapid expansion of foreclosure intervention counseling in response to the nationwide foreclosure crisis. As this is a federal appropriation, NW America must inform Congress and other entities of the NFMC program’s progress. The Urban Institute (UI) was selected by NW America to undertake a two-year evaluation of the NFMC program.
This report presents the results of preliminary analyses that attempt to measure the effects of the NFMC program on counseled homeowners. We conducted a multivariate statistical analysis on a sample of close to 61,000 loans to answer the following questions about the NFMC program’s performance through December 2008.
- Did the NFMC program help homeowners avoid foreclosure?
- Did the NFMC program help homeowners cure an existing foreclosure?
- Did the NFMC program help homeowners receive loan modifications that resulted in lower monthly payments than they would have otherwise received without counseling?
This preliminary evaluation of program effects indicates that the initial answer to these three questions is “Yes,” although the magnitude of the effects varies depending on the particular outcome. As detailed further in this report:
- The NFMC program somewhat reduced the likelihood that counseled homeowners would end up in foreclosure. We estimated that the NFMC program helped approximately 880 clients avoid going into foreclosure through December 2008. That is, the number of homeowners who were moderately delinquent (2 or 3 months) and experienced a foreclosure would have been 4,975 compared to the 4,095 actual foreclosures estimated. By helping to avoid these foreclosures, the NFMC program created potential cost-savings of $33 million between January and December 2008.
- The NFMC program was even more effective at helping homeowners cure an existing foreclosure. Many NFMC clients entered counseling already in foreclosure (22 percent), or entered foreclosure after starting counseling (11 percent). During the first year of the program, counseled homeowners were about 1.6 times as likely to get out of foreclosure, and avoid a foreclosure completion, than they would have been had they not received NFMC counseling.
- Loan modifications received by NFMC clients resulted in significantly lower mortgage payments than would have been received without the help of the program. Lower monthly payments may help reduce the likelihood of a subsequent recurrence of borrower mortgage problems. On average, we estimated that NFMC clients who received loan modifications reduced their monthly payments by $454 more than they would have without NFMC counseling.
Overall, our analysis of the NFMC program suggests that the program is having its intended effect of helping homeowners facing loss of their homes through foreclosure. In subsequent analyses, to be presented in the evaluation final report, we will estimate the program’s impact on clients who received counseling services in 2009 and also observe loan performance over a longer period of time, which will allow for a better measurement of the overall impact of the NFMC program.
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