Foreclosure Prevention Efforts Continue in Texas Metro Areas

Although the level of seriously delinquent mortgages in Texas is slightly improved from one year ago (see the accompanying article), such mortgages are still at very high levels in the metro areas. For example, over 30,000 households are at least 90 days delinquent on their mortgage in the four-county Dallas–Fort Worth metro area as of December 2010. This is a rate of one out of every 22 mortgages reported. To address this issue, local coalitions and the Texas Foreclosure Prevention Task Force (TFPTF) continue their efforts to connect at-risk homeowners with free, nonprofit housing counseling approved by the Department of Housing and Urban Development (HUD). Counselors can help borrowers evaluate their situation and understand the various remedies available to preserve homeownership. The TFPTF also works to support those counselors with funding, specialized training, marketing and outreach services.

Through its role as fiscal sponsor for the TFPTF, the Texas State Affordable Housing Corporation (TSAHC) administers federal National Foreclosure Mitigation Counseling (NFMC) funding on behalf of the state of Texas.[1] To date, the TSAHC has leveraged just under $1 million in NFMC dollars, with over $1 million in funding provided by NeighborWorks America, the state of Texas through the Texas Department of Housing and Community Affairs, Fannie Mae, and numerous financial institutions and foundations.

TSAHC has used these funds to reimburse a network of HUD-approved counseling agencies for providing over 4,800 free counseling sessions to consumers and to offset the costs of numerous training and outreach events. Counselors help borrowers navigate the foreclosure process—whether the ultimate goal is a loan forbearance or modification, short sale, deed-in-lieu or other graceful exit. Counselors also are a sounding board for the consumers to see what they need to do, beyond just the delinquent mortgage, to get their overall finances in order.

Who Is the TFPTF?

Representatives of over 100 organizations are now involved in the TFPTF. This includes lenders and loan servicers with large portfolios of delinquent mortgages as well as banks that may not have significant mortgage delinquencies but do have a vested interest in the health of the local economy. Among organizations represented on the TFPTF are

HUD-approved housing counselors,
local municipalities,
bank regulatory agencies,
the Federal Trade Commission–Dallas Region,
the Texas Office of the Attorney General.

David Long, TFPTF cochair and TSAHC president, said the task force has created significant efficiencies in the three years since it began. "Our donors appreciate the coordination of the task force, which enables them to support statewide efforts by funding just one entity," Long said.

The TFPTF and locally focused coalitions such as Houston and DFW HOPE continue to look for ways to market the message that free resources are available to troubled homeowners. Since 2009 and continuing into 2011, many of the efforts of the TFPTF and local coalitions have focused on raising awareness of the increasing risk of loan modification scams. By partnering with the Texas Attorney General's Office, the Federal Trade Commission (FTC) and others, task force members have warned consumers about these scams that guarantee protection from foreclosure in exchange for an upfront fee.

Loan modification scams have become so prevalent that the FTC enacted a rule in November 2010 that

prohibits providers of foreclosure rescue and loan modification services from collecting fees in advance,
prohibits false or misleading claims and
requires certain disclosures in advertising and communications, such as:
- the firm is not associated with the government,
- the lender may not approve changes to the consumer's loan and
- the amount of any fees, among other things.

The task force partnered with the FTC and Texas PBS to produce a 30-minute TV special, Facing the Mortgage Crisis. The special was shown in all PBS markets in Texas, covering most of the state. Community groups and organizations can join the effort to protect neighborhoods against this threat of loan modification and foreclosure prevention scams by visiting www.LoanScamAlert.org. Homeowners are also urged to fight loan modification scams by reporting this illegal activity via the website or by calling 888-995-HOPE.

Emergency Homeowners' Loan Program

Participating in a recent TFPTF webcast were many counselors from other states as well as counselors from every region of Texas. Speakers on the webcast included experts on the government's Making Home Affordable program as well as the recently announced Emergency Homeowners' Loan Program (EHLP). EHLP is designed to help unemployed or underemployed homeowners avoid foreclosure with a forgivable loan that can help them stay current on their mortgage until they are once again employed.

The EHLP program offers a deferred-payment, declining-balance loan for up to $50,000 to help eligible borrowers cover mortgage payments and preserve homeownership. Borrowers eligible for EHLP include those who:

have total household income no greater than 120 percent of area median income,
have experienced an income drop of at least 15 percent due to involuntary unemployment or underemployment related to economic conditions and/or medical emergency,
are at least three months delinquent on their mortgage and
have received notification of their lender/servicer's intent to foreclose.

Texas received the largest allocation of EHLP funds, $135 million, as a result of a calculation based on relative employment statistics. TFPTF cochair Long said there is a huge need for this program in Texas. According to Long, "When the task force first began addressing the foreclosure problem in Texas in 2007, many of the foreclosures were due to the adjusting interest rates of subprime loans; however, due to the downturn of the economy, unemployment and underemployment are now the primary reasons that many Texas families are facing foreclosure."

At last report, EHLP was expected to be open for application in early 2011. In the meantime, borrowers are encouraged to contact a HUD-approved housing counseling agency for more information. NeighborWorks has posted a website for NFMC counselor lookup at www.findaforeclosurecounselor.org/network/nfmc_lookup/.

Local Efforts

Local coalitions like the Greater Houston Foreclosure Prevention Task Force, Dallas–Fort Worth Home Ownership Preservation Enterprise (DFW HOPE), and the Don't Borrow Trouble campaign in El Paso continue to host events to raise awareness of alternatives to foreclosure.

Laura Jaramillo, vice president of the Wells Fargo Social Responsibility Group and cochair of the Houston task force, provided more details of the group's 2011 plans:

publish a timely newsletter with information about local events and resources;
host workshops for consumers to meet with loan servicers and HUD-approved housing counselors; and
host membership meetings to provide timely data to local partners.

The most recent workshop hosted by the Houston task force was held in January 2011 in Katy and was attended by over 240 borrowers. Attendees reported the following when asked how they heard about the event:

53 percent—loan servicer
13 percent—Fannie Mae
8 percent—Freddie Mac
7 percent—radio
7 percent—TV
12 percent—other (including real estate agent, Internet, friend, counselor)

For more information on statewide or local efforts, visit www.texasforeclosurehelp.org

—Julie Gunter

Note

An Urban Institute study of 180,000 loans modified in 2008 and 2009 found borrowers who received assistance from an NFMC counselor were 1.7 more times likely to cure their foreclosure status than if they had not received counseling, and borrowers who received NFMC counseling prior to their loan modification were more likely to stay current on their loan modification.

e-Perspectives, Volume 11, Issue 2, 2011

Federal Reserve Bank of Dallas Community Development Office P.O. Box 655906, Dallas, Texas 75265-5906 214-922-5377
Alfreda B. Norman Assistant Vice President and Community Development Officer		Julie Gunter Senior Community Development Advisor
Jackie Hoyer Houston Branch Senior Community Development Advisor		Wenhua Di Senior Economist
Elizabeth Sobel Blum Community Development Research Associate		Roy Lopez Community Development Specialist
The views expressed are the authors' and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System. Articles may be reprinted on the condition that the source is credited and a copy is provided to the Community Development Office.

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