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Author Archives: David Ryan

About David Ryan

David Ryan is a Foreclosure Prevention & Intervention Counselor for HOMEteam.

A Different Kind of Help

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Like all good housing counselors, my colleagues and I are trained to consider a range of options for homeowners who seek our help. But, every once in a while, we work with a client who needs us to think of solutions that don’t appear in the training guides. I had one such case recently, and we are going to call him Charlie.

In January of this year Charlie came to our office seeking help with his mortgage. In 2013 Charlie’s wife passed away. As a result, his household income fell by almost half, and his mortgage payment of $1,400 per month was more than two-thirds of his remaining income. Despite his best efforts, Charlie had fallen a few months behind on his mortgage payment and he was concerned that his lender might foreclose.

After we met and considered a number of possibilities, Charlie decided that he would like to try to get his mortgage modified to an affordable payment and, at the same time, to put his house on the market so he could move to Florida.

After a month or so, Charlie’s bank offered him a modification. Unfortunately, the modified payment was only about $200 lower than the original payment. So, while Charlie would be current on his payments, his home was not sustainably affordable. Charlie was concerned that he was going to have to accept the first offer on his house – even if it was lower than the house is really worth – in order to move on with his life. That’s when we decided to see if there was something else we could do to make Charlie’s payments more affordable.

I called the tax collector in Charlie’s home town and asked her whether the town offered a discount on property taxes for senior citizens. In fact, they do. Although the application process seemed daunting to Charlie, with a little encouragement from me, he agreed to at least try.

The first application Charlie made to the town was incomplete, but with some more coaching on my part he submitted a completed application on the second try. Then we heard nothing about the application for a few weeks. So I started making weekly calls to the town’s tax clerk.

In the end, we got a great result: Charlie’s annual tax bill was cut from almost $7,000 to $1800, which, together with the loan modification, lowered his monthly payment from the original $1400 to around $780, which he can now afford.

Charlie is now able to hold out for what he thinks is a fair price for his home, and he can devote the time and energy he had been using to worry about his mortgage payments to planning the next chapter of his life.

There are obviously limits – imposed by time and other resources – that prevent housing counselors from being able to help with all of the situations our clients might face. But it is refreshing and encouraging when a little bit of extra effort can deliver a big improvement.

Why Work With a Housing Counselor?

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New rules recently came into effect which require most mortgage servicing companies send applications for loan modification to borrowers who fall behind on their payments.  Most loan servicers also let borrowers know that assistance with completing the application is available at no cost to homeowners by HUD-approved counseling agencies.  No doubt some homeowners ask themselves: “Why work with a housing counselor?”  Why not just complete the modification application on their own and send it in?

One good reason to work with a counselor is so that you are not navigating a stressful, sometimes confusing situation on your own.  Housing counselors have the training and experience to let you know what deadlines you may be facing, which letters from the bank are cause for concern and which are harmless.  They can also help hold you accountable for getting paperwork in on time.

Whatever situation you are facing with regard to your mortgage, there’s a good chance your counselor will have seen it before.  And, if he or she hasn’t, they will usually have a colleague who has.

While a housing counselor will take the time to understand your situation, they will also maintain emotional distance.   That allows counselors to think clearly about all of the options that may be available to you, to help you sort through the advantages and challenges of each option and then to assist you as  you move in the direction you decide is best for you.

Housing counselors each see dozens, if not hundreds, of loan modifications every year.  The hope is that you will only ever see one modification.  A housing counselor’s breadth of experience gives them perspective on what should be possible in a wide variety of circumstances, and what particular servicers require in the way of documentation, etc.  It also gives counselors a strong incentive to know the guidelines of the various programs you may qualify for and what rules your loan servicer can be held to in terms of handling your application.

From a purely practical perspective, housing counselors often have resources that homeowners do not.  For instance, many counselors have access to an electronic system for exchanging documents with loan servicers.  This all but eliminates fruitless cycles of clients sending documents to servicers only to have the servicers claim that the documents were never received.

Ultimately, the value of working with a housing counselor shows up in the results they get for their clients.  A December 2010 study by the Urban Institute found that clients who worked with housing counselors reduced their payments on average by $267 per month more than clients who sought modifications on their own.   The study also found that within eight months of getting a loan modification 49% of the homeowners who obtained modifications on their own had fallen three or more months behind on their new payments.  The same figure for people who worked with housing counselors was 36%.