The National Foreclosure Mitigation Counseling (NFMC) program is a special federal appropriation, administered by NeighborWorks® America, to support a rapid expansion of foreclosure intervention counseling in response to the nationwide foreclosure crisis. This report updates preliminary analyses measuring the effect 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, specifically by increasing the likelihood of foreclosure cures, lowering borrowers’ monthly mortgage payments, and improving the sustainability of loan modifications that cure serious delinquencies and foreclosures.
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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 an update of the preliminary analysis of program effects that were
first described in our report of November 2009 (Mayer et al.). In that report, we found positive
effects for homeowners receiving NFMC counseling in 2008 in avoiding entering foreclosure,
successfully curing an existing foreclosure, and obtaining a more favorable loan modification.
In this report, we update those previous analyses to include homeowners receiving
NFMC counseling in the second program year, 2009. These new models also use an improved
comparison sample selection design, which addressed potential sample selection issues raised
by reviewers of our first report. We also present an entirely new analysis of the 2008 cohort of
counseled and non-counseled homeowners that measures whether NFMC counseling has a
positive impact on helping sustain foreclosure and delinquency cures, avoiding redefaults.
The multivariate statistical analysis presented in this report is based on a sample of
close to 180,000 loans and answers the following questions about the NFMC program's
performance through December 2009.
- 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
- Did the NFMC program help homeowners who cured a serious delinquency or
foreclosure to sustain the cure?
This 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 was effective at helping homeowners cure an existing
foreclosure. Many NFMC clients entered counseling already in foreclosure (25
percent) or entered foreclosure after starting counseling (17 percent). During the first
two years of the program, the relative odds of counseled homeowners curing their
foreclosure were 1.7 times greater than if they had not received NFMC counseling.
The resulting difference in the cure rate means that an estimated 32,000 more
NFMC clients cured their foreclosure by the end of December 2009 than would have
occurred without receiving services from NFMC counselors.
- Loan modifications received by NFMC clients resulted in significantly lower monthly
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 in the first two program years reduced their monthly
payments by $267 more than they would have without NFMC counseling.
- Homeowners who obtained a loan modification that allowed them to cure an existing
serious delinquency or foreclosure were much more likely to remain current on their
mortgage if their loan modification was obtained with help from NFMC counseling.
For clients counseled in 2008, counseling produced a 45 percent increase in the
relative odds that a post-counseling modification would be sustained through 2009.
The sustainability of modifications received after starting counseling was greater than
that of homeowners who got modifications without counseling not only because
counseled homeowners received larger monthly payment reductions, but also
because they benefitted from counseling in other ways, such as through assistance
with financial management.
- Homeowners receiving loan modifications were much more likely to cure their
defaults if they received counseling before the re-working of their loans. For clients
counseled in 2008, the relative odds of bringing their loans to current were 53
percent higher if they received pre-modification counseling than if they did not. That
means that counseling produced a combination of positive effects in moving people
from serious delinquency or foreclosure to a sustained cure of their mortgages,
increasing the odds of obtaining a cure in the first place and then raising the odds of
sustaining the larger number of cures that resulted.
Overall, our ongoing analysis of the NFMC program suggests that the program is having
its intended effect of helping homeowners facing loss of their homes through foreclosure. The
effects are strong and consistent through the second program year. The analysis in this report
substantially extends our previous findings by observing two years of counseled borrowers,
instead of just one year, and by being able to follow early entrants to counseling over a longer
time. That enabled us to examine for the first time the sustainability of cures of troubled loans.
In subsequent analyses, to be presented in a third update and in a final evaluation
report, we will be able to estimate the program's impact on clients over a still longer period of
time, which will allow a better summative measurement of the overall impact of the NFMC
program. We will also be able to assess additional sustainability issues, including the effect of
counseling in avoiding redefault by people curing their delinquencies and foreclosures without
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