Housing counseling increases the likelihood a homeowner will be granted a loan modification by 200 percent, according to research from theÂ Federal Reserve.Â
The central bank also found that counseled borrowers received more favorable terms on their loan modifications compared to borrowers who go it alone. On average, counseling yields a $110 lower monthly payment and an interest rate thatâ€™s five basis points lower than that offered un-counseled borrowers.
A separate analysis from theÂ Urban InstituteÂ found counseling raises the probability that the loan mod will actually cure a serious delinquency or foreclosure, with 55 percent of loans cured among people who received counseling versus 38 percent for those with no counseling.
The Instituteâ€™s research also showed that homeowners who received counseling prior to being granted a loan modification were more likely to remain current on their new loan. Sixty-four percent of loans were still current eight months post-modification among counseled borrowers, compared to 51 percent among borrowers without counseling.
Colleen Hernandez is president andÂ CEOÂ of theHomeownership Preservation FoundationÂ which offers mortgage counseling via the Homeownerâ€™sÂ HOPEÂ Hotline.
She says the studies, which were presented at a regulatory briefing held by the Coalition ofÂ HUDÂ Housing Counseling Intermediaries this week, verify the efficacy of mortgage counseling for financially challenged homeowners.
â€œ[N]early three-quarters of those who call our national Homeownerâ€™sÂ HOPEÂ Hotline and receive foreclosure prevention assistance from our counselors report back that they are still in their homes a year later,â€ Hernandez said.
â€œAlarmingly, the continued availability of these much-needed services is in jeopardy due to recent federal government budget cuts that removed $88 million for housing counseling programs,â€ Hernandez continued. â€œWe must restore this critical funding to ensure that financially distressed homeowners who desperately need reliable, accurate financial guidance can get it.â€