HUD No. 08-176
November 13, 2008
HOUSING COUNSELING INDUSTRY RESPONDING TO MORTGAGE CRISIS
New HUD Report shows sharp increase in foreclosure counseling
WASHINGTON - Housing counseling agencies all across the country are experiencing surging demand for their services, especially among families hoping to avoid losing their homes through foreclosure. According to a new report from the U.S. Department of Housing and Urban Development, beginning in 2005, individuals and families increasingly sought counseling to address mortgage delinquencies. Secretary Steve Preston announced the report at a HUD-sponsored roundtable discussion with more than two dozen housing counseling agencies from across the country.
HUD's report, The State of the Housing Counseling Industry shows that between 2006 and 2007 there was a 55 percent increase in the number of clients receiving foreclosure prevention counseling. This growth is expected to be much higher in 2008.
"Individual homeowners that are being foreclosed upon or at risk of foreclosure should seek out housing counseling" said Preston. "This report shows that there are more than 1,800 HUD-approved housing counseling agencies on the ground helping homeowners review their financial situation and negotiate with their lenders in order to find the best solution for them."
Preston held the roundtable session to hear how agencies are using federal funding to address capacity issues and meet the demands of borrowers facing foreclosure or trying purchasing a home for the first time. Counselors discussed challenges they face in helping homeowners and shared best practices to improve communications with struggling borrowers and strengthen financial literacy efforts.
HUD support had been growing for housing counseling agencies, from $20 million in 2001 to $50 million in 2008. In addition, federal support has now grown exponentially with $360 million in additional funds in 2008 specifically for foreclosure prevention counseling. HUD has requested another $65 million to support local housing counseling agencies in FY 2009. This report documents the characteristics of the HUD-approved counseling agencies and how they provide their counseling services. It also shows how these agencies are dramatically retooling their workforce to meet the increased demand for foreclosure mitigation counseling.
Households with a wide variety of housing counseling needs are served by these agencies. HUD-approved housing counselors provided counseling to more than 1.7 million individuals and households in 2007, including pre-purchase, foreclosure prevention, reverse mortgages, rental, and homeless assistance.
The study noted a 55 percent increase in the number of clients receiving foreclosure prevention counseling between 2006 and 2007. Of the approximately 136,000 families that completed this counseling during 2007, 45 percent were able to remain in their homes while 14 percent ultimately lost their home through foreclosure. Outcomes for the remaining 41 percent of clients are not known.
This report also finds that in the years leading up to the current crisis, more than 55 percent of low-income families seeking to buy their first home did not seek out pre-purchase counseling. This lack of counseling likely left them unprepared to make one of the biggest financial commitments of their lives and may have contributed to some of today's high rates of default and foreclosure.
The housing counseling industry has grown in capacity and sophistication in response to the increase in demand for pre-purchase counseling since the 1990s. In response to the mortgage crisis, housing counseling agencies are retraining and hiring new staff to meet demand for default counseling. In recent years there have been important efforts to promote industry standards for prepurchase and default counseling and provide increased training opportunities for staff of housing counseling agencies.
Compared to the U.S. population as a whole, counseling clients are substantially more likely to be minority. Of the 1.7 million individuals that received counseling services from a HUD-approved agency in 2007, 54 percent were white, 36 percent were African-American and approximately 20 percent were Hispanic. Most clients that received counseling from a HUD-approved agency are very low- or low-income. The following is a breakdown of the services clients received in 2007:
- 308,389 sought pre-purchase counseling
- 264, 989 sought help to resolve or prevent mortgage delinquency
- 202,795 clients received mortgage refinance and reverse mortgage counseling
- 380,006 persons received rental counseling
- 48,593 clients sought counseling on shelter or other homeless assistance programs
HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development and enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet and espanol.hud.gov.