Stopping Foreclosure Scams: New FTC Rules Take Effect Today

Beginning today, homeowners in Minnesota and nationwide are benefiting from the Federal Trade Commission (FTC)'s new consumer protection rules aimed at stopping foreclosure rescue scams. The Mortgage Assistance Relief Services Rule (MARS) bans companies from making false promises in their marketing and, beginning Jan. 31, prohibiting them from charging any up-front fees for their services.

We are all well aware that these terrible scams are robbing homeowners of their savings, their home, or sometimes both. This new Rule will further our fight to end foreclosure rescue scams in Minnesota by giving the FTC the tools needed to crack down on scamming companies across the country - companies that are targeting homeowners in our state.

In addition, MARS requires mortgage modification companies to disclose key information to consumers, including:

• They must explicitly state that they are not associated with the government, and their services have not been approved by the government or the consumer’s lender;
• The lender may not agree to change the consumer’s loan; and
• If companies tell consumers to stop paying their mortgage, they must also tell them that they could lose their home and damage their credit rating as a result of this action.

For additional information about the new rules, and what it means for Minnesota homeowners, see our full press release, here.

While the new FTC Rule is an enormous consumer protection victory, homeowners still must be armed with information to recognize these scams and to protect their homes. That's why the Minnesota Home Ownership Center has created a brochure-size, two-sided consumer education piece for you to share with your networks and consumers. It equips homeowners with simple questions to ask themselves when considering outside help for a mortgage modification, and it directs them to www.LookBeforeYouLeap.org to connect with a counselor in their community.

Order Look Before You Leap Consumer Handouts Today!

Help us help Minnesota homeowners - commit to displaying this piece today! The consumer handout is the perfect size for brochure and information racks, tabling events, or including in utility bills or other mailings. We have produced materials in both English and Spanish. And, we'll provide you copies free of charge!  Visit the campaign website: www.LookBeforeYouLeap.org to download and submit an order form.

Foreclosure Counseling Proven Effective - Again

Back in November of 2009, the Washington Post had a headline proclaiming: "Counseling Helps Borrowers Avoid Foreclosure," citing a report of a study conducted by the Urban Institute of Washington D.C.

Now, thanks to a new report from NeighborWorks America on the "National Foreclosure Mitigation Counseling Program Evaluation: Preliminary Analysis of Program Effects," we can once again state that COUNSELING WORKS.

The National Foreclosure Mitigation Counseling (NFMC) program is a federally-funded program that is designed to support the rapid expansion of foreclosure intervention counseling in response to the nationwide foreclosure crisis.  MN Housing (Finance Agency) has been a recipient of NFMC funds... that support the work of the MN Home Ownership Center's network of non-profit Foreclosure Counselors.

The analysis presented in the report is based on a sample of close to 180,000 loans held by homeowners that received NFMC-funded foreclosure prevention counseling.  Here are just some of the findings:

• The NFMC program was effective at helping homeowners cure an existing foreclosure. During the first two years of the program, the relative odds of counseled homeowners curing their foreclosure were 1.7 times greater than if they had not received NFMC counseling. The resulting difference in the cure rate means that an estimated 32,000 more NFMC clients cured their foreclosure by the end of December 2009 than would have occurred without receiving services from NFMC counselors.
• Loan modifications received by NFMC clients resulted in significantly lower monthly mortgage payments than would have been received without the help of the program. Lower monthly payments may help reduce the likelihood of a subsequent recurrence of borrower mortgage problems. On average, we estimated that NFMC clients who received loan modifications in the first two program years reduced their monthly payments by $267 more than they would have without NFMC counseling.
• Homeowners who obtained a loan modification that allowed them to cure an existing serious delinquency or foreclosure were much more likely to remain current on their mortgage if their loan modification was obtained with help from NFMC counseling. For clients counseled in 2008, counseling produced a 45 percent increase in the relative odds that a post-counseling modification would be sustained through 2009.

 
There are many more advantages to Foreclosure Counseling cited in the full report.
 
Here in Minnesota, research conducted by the Federal Reserve Bank of Minneapolis showed that Foreclosure Counseling cost just under $400 per household -  $400 to save homeowners an additional $3,204 per year, improve their odds of curing foreclosure and increase the long-term success of a modification... plus many other 'intangible' benefits... seems like Foreclosure Counseling is a great investment in long-term housing stability for MN Families.
 
If you or someone you know is struggling with mortgage payments, help is available.  Visit the MN Home Ownership Center's website for more information.

Shopping For A Mortgage

According to a LendingTree/Harris Interactive survey released on December 14th, about 40% of recent home buyers obtained JUST ONE mortgage loan quote before purchasing their home.

According to the survey of just over 1,300 buyers, 70 percent of borrowers find shopping for a mortgage frustrating, citing the complexity of the terms as the number one reason people choose not to 'mortgage shop'.

The survey also reveals that although buyers recognize that their mortgage choice is a decision that will affect them financially for the next 15 – 30 years (or more!), nearly three-quarters (72 percent) of homeowners spent less than eight hours shopping for their home loan. Even more shocking? One in ten spent less than TWO MINUTES shopping for their loan.

In Minnesota... buyers have the opportunity to take a Home Stretch workshop, the homebuyer workshop recognized nationally as a proven tool to prepare homebuyers to be successful homeowners.  There is an entire section of the Home Stretch workshop dedicated to fully understanding mortgage loan terminology, how to shop for a loan, how credit affects loan payments and how to avoid being taken advantage of when choosing a loan.

In a forthcoming report from the MN Home Ownership Center, Home Stretch participants reported that help with understanding mortgages and the loan process was the MOST HELPFUL part of the workshop.  One more fact (just in case you're not convinced yet)... NINETY-FIVE PERCENT of Home Stretch participants reported that their participation in Home Stretch will help in the process of buying a home.

Are you thinking of purchasing a home in Minnesota?  You can learn more about the mortgage loan process - - and the entire home buying process by taking a Home Stretch workshop.  For more information, click here.

Update on Minnesota's Homeownership Gap

This post is a guest post by Dr. Kim Skobba, a research and communications consultant that works with the Minnesota Home Ownership Center on Affordable Housing issues and housing policy.  Dr. Skobba publishes her own blog at http://housing-sense.blogspot.com/

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Update on Minnesota's Homeownership Gap

At 73.7%, Minnesota maintains the highest overall homeownership rate in the nation. When it comes to the rate of homeowners of color, Minnesota does not fare as well. The rate of homeownership among emerging markets is 43.3% - representing the 5th largest gap in homeownership rates in the nation.

[Last] week at the EMHI Summit, Michael Grover (Federal Reserve Bank of Minneapolis) and John Patterson (Minnesota Housing) provided a summary of their research on trends in emerging market homeownership. Their analysis of American Community Survey and Home Mortgage Disclosure Act (HMDA) data identifies some apparent trends and offers a few unexpected findings.

• The rate of emerging market homeownership declined for the first time since 2000. The rate of homeownership among emerging markets held relatively steady (at about 46.5%) during 2006-2008, which was surprising given the foreclosure crisis and what is known about its affect on minority homeowners. In 2009, the emerging market homeownership rate declined to 43.3%.
• Some sub-groups of African Americans experienced particularly significant declines in their rates of homeownership. Those in the 45 to 54 age group saw a decline from 46% to 31% and those with a family income between $40,000 - $60,000 experienced a decline from a rate of 57% to 32%. Grover stated that more analysis is needed to make sense of these changes.
• Minnesota Housing's affordable loan and entry cost assistance programs are helping emerging markets buyers. In 2009, nearly one-third of Minnesota Housing's loan originations were to emerging market buyers, compared to 10.9% in the overall market.
• Subprime lending among emerging markets is on the decline. The rates of subprime lending (purchase and refinance) dropped from a high of over 40% in 2006 to well below 10% in 2009. Not much of a surprise but good news nonetheless.

The Emerging Markets Homeownership Initiative (EMHI) Summit is an annual event hosted by the Minnesota Home Ownership Center. This year's summit provided the opportunity to learn about the status of emerging market homeownership and some of the current issues facing emerging market homebuyers. Materials from this year's EMHI Summit (including the Grover and Patterson presentation) are available on the Center's EMHI webpage.

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This post was originally published on Dr. Skobba's blog: here.
Reposted with permission.

Filling the Foreclosure Funding Gap

The Good News:
Minnesota Housing announced a $1 million award to the Minnesota Home Ownership Center yesterday during a press conference held at a foreclosed property on Saint Paul’s east side. The award comes at a critical time when federal funding gaps threaten the ongoing work of 74 counselors across the state.

Coverage of the press conference can be seen here (Fox-9), here (Finance & Commerce) and here (MPR).
UPDATE: Star Tribune has also covered us: here.

“We’ve come too far and invested too much in foreclosure prevention across the state to let this funding gap damage our efforts and the infrastructure we’ve built together,” said Dan Bartholomay, Commissioner of Minnesota Housing. “Minnesota has benefited from a strong, statewide network of foreclosure counseling agencies, counseling nearly 16,000 households in 2009, and we’re here today to make sure that continues.”

Here's the situation... the foreclosure counseling network in Minnesota faces an immediate threat to the provision of services, even while facing continued, and in some areas, increased, demand foreclosure prevention counseling. Current funding has been exhausted and the next round of federal funding will not be available until March 2011, pending congressional authorization.

“Minnesota Housing has demonstrated outstanding leadership throughout this prolonged foreclosure crisis,” added Julie Gugin, Executive Director of the Minnesota Home Ownership Center. “Their latest contribution will help ensure that tens of thousands of Minnesotans have access to quality, nonbiased services that will help them avoid foreclosure. Their partnership is critical to stabilizing housing and communities throughout Minnesota.”

With this $1 million award, the Minnesota Home Ownership Center is prepared to work directly with counseling organizations to continue services.

The Bad News:
Center staff has calculated that it will take just over Five Million dollars to cover the cost of maintaining foreclosure counseling services in the state of Minnesota at current levels through the end of 2011.  We'll keep you informed about the fundraising process - and its impact on the counseling network over the coming months. 
 
For now... services will continue without interruption and MN Homeowners that are struggling with their mortgage payments - or think they may have difficulty making payments soon, should contact a non-profit (FREE!) foreclosure counselor TODAY.