Transcript Dealing with a New Market Place: Managing Mortgage

Collaborative Solutions:
Creating Successful Foreclosure
Intervention Programs
NeighborWorks®
Center for
Foreclosure Solutions
www.nw.org/foreclosuresolutions
NeighborWorks® America
 For almost than 30 years, NeighborWorks®
America has created opportunities for people
to live in affordable homes, improve their lives
and strengthen their communities.
 NeighborWorks®, a Congressionally chartered
organization, provides financial support,
technical assistance, and training for
community-based revitalization efforts around
the country.
NeighborWorks® America
Since 1993, NeighborWorks’ Campaign
for Homeownership has helped 104,085
families to become homeowners by:
– investing $11.1 billion in America’s
communities.
– providing homebuyer education and
counseling to 598,421 families
– establishing 96 NeighborWorks®
Homeownership Centers in communities
across the country.
Taking Local Solutions to Scale
City of Chicago and Neighborhood Housing
Services of Chicago’s Homeownership
Preservation Initiative (HOPI) results:
4,000 homeowners in Chicago have been
educated about foreclosure
1,300 families were able to avoid foreclosure
as a direct result
330 vacant or neglected buildings were
reclaimed
$267 million in savings for the City of
Chicago, its residents, and lender partners
Source: HOPI Partnership Lessons and Results; Jan 2003 – Dec 2006
The NeighborWorks® Center for
Foreclosure Solutions
Collaborative, cross-sector
partnership developed to preserve
homeownership by convening and
supporting a coordinated
foreclosure intervention strategy
in communities nationwide.
National Partners
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American General
Bank of America
Barrett Burke, LLP
Citi
Countrywide
EMC Mortgage
Fannie Mae
Freddie Mac
GE Money
GMAC Rescap
Homeownership Preservation
Foundation
 Housing Policy Council
 HSBC
 JP Morgan Chase
 Mortgage Bankers
Association
 NeighborWorks® America
 National City
 Ocwen
 Option One
 State Farm Insurance
 Wells Fargo Home Mortgage
 Washington Mutual
 Local cross-sector coalitions
in foreclosure “hot spots”
Multiple Underlying Causes of
Foreclosure
Business
Practices
Housing
Market
-fraud
-appraisals
- inspections
-seller grants
- house prices
- collateral risks
Borrower
Behavior
-consumer credit usage
- income/employment
- property maintenance
CHALLENGE #1
Increasing Foreclosure Rates call for
increased post-purchase counseling
capacity
SOLUTION
Specialized training and development of a
rigorous certification program to train
foreclosure counselors. (www.nw.org/nchec)
Capacity building through connecting
homeowners to the Housing Preservation
Foundation’s toll-free, 24/7, bi-lingual hotline
Reaching Homeowners: 888-995-HOPE
 Toll-free, 24/7 hotline – on-demand
foreclosure prevention counseling
 85 trained counselors from 5 nonprofit HUDapproved agencies, English & Spanish.
 Connect caller with lender or a local
(NeighborWorks®) organization.
 Counselors determine why the borrower is
delinquent, what their financial situation is,
what options are in their best interests, and
connect the borrower to the servicer.
Benefits of Partnered Service
 Immediate and anonymous hotline appeals
to distressed borrowers.
 Face-to-face counseling provides additional
value.
 Efficient leverage of resources; saves local
organizations time and money.
 86% of homeowners counseled would
recommend hotline service to family and
friends.
CHALLENGE #2
Approximately 50% of delinquent borrowers do not make
contact with their lender.
– Homeownership Preservation Foundation data
Homeowners fail to contact their lender because they are
embarrassed, don’t believe the lender can help, and/or believe
it would cause them to lose their home more quickly.
– Freddie Mac/Roper poll of 2,031 U.S. homeowners, conducted 2005.
SOLUTION
Public Outreach and Education
 3 Year Ad Council Campaign: national,
regional, and local: TV, Radio and Print ads.
Ad Council Campaign
Objective: Reduce foreclosures by helping at-risk
homeowners understand their options and urge them
to seek help by calling 888-995-HOPE.
 Geared to Increase Contact Rates with Borrowers
 Targeted at low- and moderate-income delinquent
borrowers.
 Launch June 25, 2007 in Washington, DC with
series of local launches to follow throughout
2007/2008
 28,000 media outlets
CHALLENGE #3
Foreclosures are often clustered in
low-income and minority
communities
SOLUTION
 Hot Spot Coalitions
– Partnering with local community partners
– Local training, workshops and counseling
– Local marketing to reach distressed borrowers
Cross-Sector Partnerships
Counseling Service
•
Value
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Professionally trained counselors, not volunteers
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Available via phone and online
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Have existing communication bridges to mortgage lenders
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Refer homeowners to other local and national resource network
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Counselors are paid for service of counseling NOT outcomes
• Best interest of customer
• No undue influence from lender/servicer or other party
–
•
Single-counselor case management
Counseling Process
–
Identify core problem
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Develop goals, budget, recommendations
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Create written action plan
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Engage with lender/servicer or other 3rd party, as needed
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Ongoing follow up
A Growing Need
Number of HOPE Hotline calls skyrocketing
(April 06 vs. April 07)
1000
650
500
0
Daily Calls
75
2006
2007
HOPE Hotline is Effective
For every 100 calls
12 work out
47 counseling sessions
8 sell home
20 avoid foreclosure
Thus, conservative assumption is 42% of counseled
homeowners avoided foreclosure
Source: Q1 2007 HOPE Hotline Results
Daily Impact to Industry
650 calls/day
305 counseling
sessions/day
76 Work out/day
52 sell home/day
128 foreclosures prevented/day
($30,000 per foreclosure)
Counseling saves $3.84 million/day
Source: Q1 2007 HOPE Hotline Results
Who Calls the HOPE hotline
• Our partner, CCCS Atlanta, reported on the 15,000 families
they counseled in 2006.
– Average age:43
– Marital status: Married 50%, Single 36%, Divorced 14%
– Ethnicity: 47% African American, 45% Caucasion, 4% Hispanic
– Gross Annual Income: $36,000
– Monthly deficit: $702
– Mortgage payment: $1,110
– Unsecured debt: $14,771
– FICO score: 501
Outcomes: 25% are recommended for loan workouts
National 888-995-HOPE
Counseling Outcomes
Q1 2007
Referred to
Neighborworks/NHS (as
primary outcome)
13%
Lender W orkout
Suggested/Pending
/Reinstated
25%
Credit Counseling
Consolidation Plan
Seriously consider
1%
selling/placing house up
for sale
More Counseling
17%
Adv ised/Scheduled
7%
Referred to other agency
(i.e. mental health, utility
Budget Improv ement
assistance, etc.)
Needed Before W orkout
12%
25%
62% have already missed more than two payments
Loan Status at First Contact with 888-995-HOPE
Q1 2007
Unknown/Unsure
3%
<30 days late
14%
120+ day late
30%
30-60 days late
62% have already missed two
or more payments when they
call, up 5 points from last
quarter
21%
61-120 days late
32%
Wide variety of loan products; most are sub-prime
Loan Type Per Homeowner Report
Q1
Other loan product
2%
Homeowner does not
know
18%
Fixed Rate under 8%
21%
FHA/VA ARM
0%
FHA/VA Fixed
Fixed rate 8%+
14%
5%
80/20 Loans
5%
Inerest Only
1%
ARM currently 8%+
24%
ARM currently
under 8%
10%
The Value Proposition
• 1. We reach the hard-to-reach borrowers, the 50% of families who
foreclose who never talk to their lenders.
• 2. Average daily number of calls, May, 2007 is 650. Call volume
increases 25% every 6-8 weeks
• 3. Our capacity keeps pace with call volume increases; quality
stays high.
• 4. At least 42% of the homeowners we counseled have action
plans to avoid foreclosure
• 5. That’s 128 potential foreclosures avoided DAILY at a savings to
industry of $3.84 Million
Partners coalesce around key messages
• Foreclosure is not inevitable
• Help is available for free 24/7 at 888-995HOPE
• Call early—you have better options
• The bank doesn’t want your house; they
want to talk to you
• Nothing is worse than doing nothing
Linkages to community efforts
• NeighborWorks and the Foundation have developed a
website available to all 85 telephone counselors called
• Non-profit referral.org which links the homeowner to
multiple services in their area:
– Unemployment assistance
– Legal aid
– Utility assistance
– Property tax relief
– Rescue funds
– State attorneys general
Components of Successful Partnerships
• The group comes together around a common focus and
alignment of interests.
• It’s somebody’s job to be the convener, the facilitator. NWA
plays this role
• There are ground rules for how the group conducts its
business
• The group takes the time to explicitly describe what their
expectations are.
• Members of the group agree to dedicate the necessary
time and attention to reach the desired goals.
Cross-Sector Partnerships
Neighborhood Housing Services of
Greater Cleveland
NHSGC Collaborations:
Statewide (Ohio)
Countywide (Cuyahoga)
Governor’s Taskforce on Foreclosure
Prevention
www.nhscleveland.org
Neighborhood Housing Services
of Greater Cleveland
 Ohio is leading or has led the nation in the rate
of foreclosure per capita.
 Cuyahoga County (part of NHSGC service
area) is leading or has led the state of Ohio in
rates of foreclosure per capita.
 NHSGC offices are located in the epicenter of
the foreclosure crisis, flipping and predatory
lending.
Neighborhood Housing Services
of Greater Cleveland
What motivated NHSGC to participate in:
888.995.HOPE national hotline initiative
NeighborWorks® Statewide Initiative
Cuyahoga County 2-1-1 Initiative?
– The mission focus of homeownership promotion
and sustainability.
– The breadth and depth of the foreclosure crisis.
– Efficient use of resources (financial, human and
intellectual).
Neighborhood Housing Services
of Greater Cleveland
 NHSGC Role in 888.995.HOPE National
Hotline Initiative
HUD Certified Housing Counseling Agency
– all staff received NeighborWorks®
training in beginning, intermediate and
advanced foreclosure prevention
Provide one-on-one, face-to-face
counseling of hotline referrals
Provide local contact in a 4 county region –
Cuyahoga, Lorain, Erie and Huron
counties
One of 12 organizations across the state of
Ohio
Neighborhood Housing Services
of Greater Cleveland
NHSGC Role in Ohio NeighborWorks®
Initiative
Administrator/grantee of $4.1 million of
Ohio Home Rescue Funds
Office of Community and Housing
Partnership (housing trust fund financing)
$1 million of year one funding.
Ohio Housing Finance Agency $3.1 million
of rescue funds covering 3 years
All participating agencies are the same as
the Ohio participants in the national hotline
(888.995.HOPE0
Neighborhood Housing Services
of Greater Cleveland
OHCP Rescue Funds
 Ohio Department of Development, Lee Fisher,
Director
 Funded with housing trust fund ($1 million)
 Qualifications:
 Up to 65% of area median income
 Documented trigger event
 Ability to maintain loan once “caught up”
 Agree to mandatory counseling written into the note
 Terms:
 $3,000 or 3 months of mortgage payments, whichever is
less
 3 year, 0%, deferred, forgivable 2nd mortgage
Neighborhood Housing Services
of Greater Cleveland
OHFA Rescue Funds
 Ohio Housing Finance Agency – Doug Garver,
Executive Director
 $3.1 million
 Qualifications:
 65% to 115% of area median income, up to 140% in
certain areas
 Documented trigger event
 Ability to maintain loan once “caught up”
 Agree to mandatory counseling written into the note
 Terms:
 $3,000 or 3 months of mortgage payments, whichever is
less
 Due on sale or transfer, mortgage is assigned to OHFA
Neighborhood Housing Services
of Greater Cleveland
Ohio NeighborWorks®
Foreclosure Prevention
Participants and Coverage
Neighborhood Housing Services
of Greater Cleveland
Cuyahoga County Foreclosure Prevention
Initiative
 Financed by Cuyahoga County Board of
Commissioners
 Administered by Cuyahoga County Treasurer Jim
Rokakis and the Cuyahoga County Department of
Development, Paul Oyaski, Director
 9 Housing Counseling Agencies Participating
 Reliance on United Way’s 2-1-1 Call for Help
 TANF funding for staffing and rescue funds
 NHSGC – 35 calls per day
 Initiative nationally awarded runner for Innovations in
Homeownership, Treasurer Rokakis awarded
NeighborWorks® America Local Government Service
Award
Neighborhood Housing Services
of Greater Cleveland
Governor’s Taskforce on Foreclosure Prevention
 Governor Ted Strickland, chaired by Department of
Commerce Director, Kimberly Zurz
 25 members representing:
 Local, State and Federal Government Representatives
 Lender Representatives
 Nonprofit Sector Representatives
 Subcommittees of the Taskforce
 Educating/Contacting Borrowers
 Legal
 Housing Options
 Responsible Lender Options
 Legislative
Neighborhood Housing Services
of Greater Cleveland
 Governor’s Taskforce - continued
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First meeting, April 10
Last meeting scheduled August 13
Public Testimony May 21
Goals:
 Lender/servicer participation in reducing foreclosure
filings/occurences
 Best Practices
 Increase tools (i.e. OHFA’s Opportunity Loan Refinance
Program www.ohiohome.org
 Legislative Actions
 Legal Actions
 Mitigation and Adaptation
 State Treasurer Richard Cordray – Save Our Homes Taskforce
www.saveourhomestaskforce.org
 A working taskforce for leaders from throughout the state of
Ohio with defined action steps and a time table for
completion. Implementation in parallel.
Neighborhood Housing Services
of Greater Cleveland
 Components for Successful Partnership
 Vision + Courage + Persistence = Leadership
 Collaboration and shared leadership
 Non-partisan
 Client-centric vs. ego-based
 Defined goals, objectives and mission
 Willingness of all sectors, private, public, nonprofit to work
together
 Do not spend time rebuilding the wheel
 Use of national resources such as NeighborWorks® America
 Partnerships can be multilayered and multi-jurisdictional
 Do not always lead with funding requests
 Solution-based
Cross-Sector Partnerships
CHASE HOMEOWNERSHIP
PRESERVATION OFFICE MOTIVATION
• Chase Homeownership Preservation Office was
created in 2004 as a port of entry for non-profit
counseling agencies and housing advocates
working with Chase serviced customers to prevent
foreclosure and to focus on developing solutions.
• In 2004 the increase in foreclosures was becoming a
growing concern. The NHS Chicago HOPI program
was the first comprehensive initiative created to look
at the issue and develop a holistic approach to
assist homeowners at risk, stabilize neighborhoods
and bring stakeholders together.
• The model was replicated in a number of local
markets and the Homeownership Preservation
Foundation’s toll free number providing telephonic
counseling was introduced.
CHASE HOMEOWNERSHIP
PRESERVATION OFFICE MOTIVATION
 The expansion of the HOPI model in markets
experiencing high rates of foreclosure as well as the
development of other task forces across the nation
made it clear that a comprehensive national
approach was needed.
 Issues of training counseling agencies, that thus
far had limited experience in foreclosure prevention
workout solutions, building capacity and proactive
outreach to the consumers at risk needed to be
addressed.
 The expertise and broad geographic coverage
provided by NeighborWorks and the national
telephonic counseling capabilities of
Homeownership Preservation Foundation with 24/7
coverage brought much needed resources together
CHASE HOMEOWNERSHIP
PRESERVATION OFFICE ROLE
 Chase provides funding and has been an active
member of the Advisory Committee for this
foreclosure prevention campaign since the inception
 We provide access to Chase’s dedicated Help
Line, dedicated e-mail address and fax line for
the telephonic counseling network and the “on the
ground” NeighborWorks’ affiliates providing face-toface interaction with the consumers.
 Open communication with NeighborWorks and the
Homeownership Preservation Foundation to address
process, reporting and other opportunities to
improve the program.
 Support at the local market level
CHASE HOMEOWNERSHIP PRESERVATION
OFFICE BENEFITS OF COLLABORATION
 You have already heard the statistics on the number
of homes that go to foreclosure without the
consumer contacting their lender. Many times
these foreclosures could have been avoided had
there been dialogue between the lender/servicer
and the homeowner. Through the Ad Council
campaign we hope to greatly reduce the “no contact”
numbers.
 It is our expectation that encouraging individuals to
seek professional assistance or contact their lenders
earlier will increase the opportunity to have
successful resolutions.
 Favorable impact on loan performance as a result
of counseling from professional, trained counselors.
CHASE HOMEOWNERSHIP PRESERVATION
OFFICE BENEFITS OF COLLABORATION
Leveraging resources
Access to research results
Healthier, more stable communities
Improved image for the industry
Customer Retention
CHASE HOMEOWNERSHIP
PRESERVATION OFFICE – ELEMENTS OF
SUCCESSFUL PARTNERSHIPS
 Open and productive communication
– Steering Committee level
– Counselors and lender/servicer staff
 Mutual respect
 Establish clear and realistic expectations
– Measure results
– Flexibility to make adjustments in the model
 Share best practices
National Approach Makes Sense
 Foreclosure intervention/prevention is good
business
 It’s less expensive to counsel and
restructure loans than to foreclose
 We can reach economies of scale by
working together nationally and maximize
impact
 Many partners help reach more borrowers
and bring more resources
 Leverages critical resources
 Metrics in place to prove results