By Pam Marron | November 2016 | for National Mortgage Professional Magazine
On May 19th, 2016, I was appointed to the 1st Housing Counseling Federal Advisory Committee (HCFAC) under HUD. This committee, consisting of 12 members from the mortgage, real estate, housing counseling industries as well as consumers, was formed by HUD to find better ways for HUD counseling to assist consumers with sustainable home ownership. Our first meeting was in Washington, D.C. this week.
While in Washington, a visit to the U.S. Treasury was made to talk about a government 2nd mortgage idea that might allow a refinance for 3.2 million negative equity homeowners who have conventional 1st mortgages not covered by Fannie Mae or Freddie Mac and for negative equity 2nd mortgages and home equity lines of credit (HELOC). The idea could provide a refinance where none exists for those who are current on their mortgage and struggle to stay put in negative equity homes. Many negative equity homeowners have resetting interest only loans and most are just looking for some relief to a lower, fully amortized interest rate that allows equity to build while values return.
At the HCFAC meeting, representatives of top housing agencies that assist homeowners assembled on panels in front of us throughout the day. It was tough to contain disappointment after learning that pre-foreclosure housing counseling funds were gone from the 2017 budget. The aftermath of the housing recession was brought up in multiple conversations and I felt compelled to bring up that we can’t forget the 6.7 million homeowners who still have negative equity in their homes. I was determined to make sure that these people who were in top agencies would know “it wasn’t over yet”. The cringe on the face of a panelist after letting him know that most lenders still required negative equity homeowners to go delinquent before help is provided signaled that this probably wasn’t the first time he had heard this.
Being the bearer of bad news wasn’t what I intended to relay, especially when the direction was shifting to helping consumers purchase homes again.
But, then it turned. One of the panelists was with the National Foundation for Credit Counseling (NFCC). He talked about credit, acknowledging where we had come from and that there was still work to do.
It was then that my greatest frustration was realized: the lack of attention to damaging current loss mitigation policy that knowingly harms credit built over a lifetime…. credit that is the benchmark of the mortgage and real estate industry and the driver of our economy.
Most homeowners trying to stay in negative equity homes refuse to go delinquent on their mortgage just to get a modification, often their only option available. Five years of trying to expose current policy of most lenders that requires mortgage delinquency first before help is offered is still unbelievable to many. Policy that destroys credit of those already in trouble, that has long term negative consequences and that is affecting a growing number of elderly homeowners can be changed. Allowing for a solution that promotes keeping credit intact with sustainable refinancing can allow responsible homeowners with negative equity to stay put in homes while values return.
Realization occurred that the best agencies who can help were in this room, and that the day before the Treasury had given good news on the forefront and provided valuable information and more contacts that might be able to help. I realized that something very valuable that will come out of getting this HCFAC committee of twelve from four different sectors of housing together. It is also clear that our task will not be easy.
There is still more to be done. The Freddie Mac automated system is turning down past short sellers, reading the short sale credit as a foreclosure, even after the four-year wait needed to get a new mortgage. The fact that loan originators must pay for rapid rescores when helping eliminate disputed accounts on credit has prompted delays on mortgage closings and has resulted in a lack of loan originators wanting to help correct this credit. Finally, patience to wait until after this contentious election is over in order to push forward on getting problems resolved has been short.
But, for the first time in years, progress feels attainable. We are going in the right direction. Stay tuned.