Foreclosure counseling was a bureaucratic waste

Most federal assistance programs are a waste of money. They set up an entrenched bureaucracy that drains taxpayer resources and provide little economic return. There are exceptional government programs that deliver great benefit at little cost to taxpayers, but the foreclosure counseling services are not one of those programs. Most of these borrowers are hopelessly underwater or overextended. The counseling might have done some good before they got into this mess, but at this point, telling them what they should have done differently isn’t going to help.

Programs like this are created as political cover to deflect criticism that the government is not doing enough. There is little or no hope these programs will have positive outcomes for anyone involved. Most of the borrowers who “benefit” from these programs get sold into slavery for a lifetime to “save” a house they would be better off losing in foreclosure. These programs are a sham, and they should be eliminated.

Harder-Luck Foreclosures Grow as Funding Wanes

By Emma Fidel on August 07, 2012

… Last November, Congress also appropriated $45 million for housing counseling in fiscal year 2012 through the Department of Housing and Urban Development after slashing all counseling funding during April budget negotiations. HUD had requested $88 million.

Veto Threat

The House passed a 2013 HUD appropriations bill in June allocating $45 million to housing counseling, $10 million less than HUD requested. The bill is now stalled in the Senate, and the White House has said President Barack Obama plans to veto the bill if passed in its current form. …

“The housing counseling community needs to work to restore federal funding,” said David Berenbaum, chief program officer for the National Community Reinvestment Coalition. “Housing counseling organizations have had to downsize across the country at a time when the demands on service are at an all-time high.

They should be downsized out of existence. These services are part of the amend-extend-pretend charade. Banks need to foreclose on these people and be done with it. Most of these people have been struggling for five years. At this point, a foreclosure is a mercy killing.

Repeat Defaults

Counselors say they have noticed three trends in homeowners seeking counseling in the past year: First, clients like Brown have been stuck in the process longer through multiple defaults and modifications. … and agencies are helping homeowners “who have much harder-to-rectify cases.”

At this point, they are just helping people game the system for more free housing.

Unemployment or Crisis

“It’s not just a low-income problem,” Richardson said. “We’re seeing folks who are middle- and upper-income as well, where loss of employment has been the catalyst, or a family crisis or some other emergency has triggered the problem.”

The situation was triggered by buying too much house.

“The fact that they’re current does not mean they’re not struggling,” Fuhrman said. He estimated that 50 percent of the foundation’s clients are current on their mortgages, compared with 30 percent last year.

More than half their clients are squatting until foreclosure.

Services Free

Counselors repeatedly stress to clients that they shouldn’t pay for counseling, since HUD-approved services are free. …

Which is why they keep petitioning for more government funds.

Outcomes Improved

Counselors point to a number of studies that indicate counseling’s effectiveness. A December 2011 Urban Institute report conducted for NeighborWorks America found that while 9 percent of homeowners cure their serious delinquencies or foreclosures after 12 months without counseling, that number nearly doubles to 17 percent with counseling. …

An 83% failure rate is a sign of success?

Budgeting Help

Counselors might suggest that clients stop paying for cable television or keep better track of how much they spend on groceries, Godfrey said. They usually guide a client through paperwork and may contact the servicer about a modification on the client’s behalf. …

You can imagine one of those counseling sessions, can’t you?

When a client cannot stay in his or her house, a counselor’s guidance and support can help borrowers make a smooth transition to a smaller house or out of homeownership, counselors said.

“Just by simply engaging us in the process, they will see a lot more successes,” said Katherine Peoples-McGill, founder and executive director of HPP CARES. “Sometimes it’s just having a person in front of you to say, ‘Hey, this is not going to work’.” …

We need counselors for that? Didn’t a representative of the bank tell them the same thing? Perhaps the banks should put more kind words of sympathy in their get-out-of-our-house letters? We need kinder and gentler banks, right?

Because HUD-approved agencies don’t charge for their services, they rely on HUD and private donors for funding. The $55 million HUD requested from Congress for FY 2013 would directly fund housing counseling for 185,000 families and training for 4,800 counselors, according to HUD’s proposal.When Congress zeroed out housing counseling funds in 2011, banking groups including the Mortgage Bankers Association pushed for restored funding. William Killmer, the association’s senior vice president of legislative and political affairs, wrote to the Senate Committee on Appropriations supporting “the great work facilitated by this program.”

Perhaps it will die this time around. The last thing we need is another entrenched bureaucracy which accomplishes nothing.

Value Unquestioned

I do feel we’re at a point now where it is no longer a question, the value of the nonprofit space in providing these services,” Richardson said.



I wonder if Mr. Richardson said that with a straight face?

Even so, counselors predict a bleak outlook for homeowners in the coming years and say client numbers will remain relatively static until at least 2014.

Client numbers will remain steady until lenders get serious about clearing out the shadow inventory.

As many as 3.6 million mortgages are expected to enter foreclosure, short sale or distress through 2013, according to a Bloomberg Government study published July 13.

HPF, whose HOPE Hotline has received an average of 1.3 million calls a year since 2007, estimates it will continue receiving at least 1 million calls per year, according to Fuhrman.

The role of housing counselors is only going to grow,” Berenbaum said.

Not if we can manage to kill off these programs first.

Five years squatting — a new record!

As the housing bust drags on, so does the amount of time delinquent mortgage squatters get to live in their houses payment-free. The former owners of today’s featured property got to squat longer than anyone I have seen so far. The quit paying something in the first half of 2007, a little over a year after their last Ponzi refinance. The lender didn’t foreclose on them until 2/3/2012, almost five years later.

Were you paying for your housing over the last five years. These people weren’t.

Foreclosure Record
Recording Date: 12/02/2010
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 11/09/2009
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 08/05/2009
Document Type: Notice of Default
Foreclosure Record
Recording Date: 12/29/2008
Document Type: Notice of Rescission
Foreclosure Record
Recording Date: 06/11/2008
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 03/04/2008
Document Type: Notice of Default
Foreclosure Record
Recording Date: 10/18/2007
Document Type: Notice of Rescission
Foreclosure Record
Recording Date: 09/04/2007
Document Type: Notice of Default
  • This property was purchased for $235,000 back in 1993. I don’t have the original loan information, but based on subsequent refinances, the likely put 20% down.
  • On 10/29/1998 they obtained a $36,231 stand-alone second.
  • On 10/15/2002 they refinanced with a $300,700 first mortgage.
  • On 12/18/2003 they refinanced with a $360,000 first mortgage.
  • On 1/6/2005 they refinanced with a $426,000 first mortgage.
  • On 1/3/2006 the refinanced with a $490,000 first mortgage.

Total mortgage equity withdrawal was at least $265,000 plus their original down payment. Not a bad take, particularly when you factor in the benefit of nearly five years of squatting.

What should this guy be counseled to do?