Mortgages: Counseling Before Borrowing

“There’s this thing that the dream of homeownership in America is dead, and we’re not seeing that,” said Ms. Grier, the chief executive of Neighborhood Housing Services of New York City, which promotes affordable housing and is one of several groups that counsel homeowners and would-be homeowners. “We’re still seeing families interested in wanting to own their own property.”

The nonprofit GreenPath Debt Solutions, a counseling agency that has several offices in New York and provides telephone support nationally, is also seeing a steady stream of activity. Its goal is to teach about money management, mortgages, the closing process and homeowner responsibilities, “so first-time home buyers can make an informed decision,” said Setina Briggs, the housing program manager.

Barry Zigas, the director of housing policy at the Consumer Federation of America, said counseling wasn’t an absolute necessity “to become a competent, well-educated consumer.” But it’s time worth spending, he argued. A home purchase is “the sort of transaction you ought to enter into with as much information as you can.”

Prepurchase education, although traditionally aimed at low- and moderate-income first-time buyers, is available to anyone. Some loan offerings, like New York City’s HomeFirst Down Payment Assistance Program, require that people go through training to participate.

In the wake of the financial crisis, there has been plenty of debate about whether there was too much emphasis on homeownership and whether people who never should have bought were pushed into risky loans. Supporters of prepurchase education, including lenders, say that it reduces the chance that borrowers will get in over their heads.

But a recent study conducted for the Mortgage Bankers Association found that there has been little scientifically rigorous research to prove that claim. Still, Ms. Grier and others cite their positive experiences — her agency, for instance, reviewed the records of about 250 families who had gone through counseling from 2005 to 2008. “We did not find anyone who lost their homes due to being in a bad mortgage product,” she said. Those who did face problems did so because their income had decreased.

Families coming to counseling now say they want to avoid making the mistakes that brought others to the brink, she said. And those going through foreclosure counseling frequently say they wish they had learned the ins and outs of ownership before buying.

Sometimes counseling involves a one-on-one review of finances, in person or over the phone. That can be buttressed with classes — Neighborhood Housing Services, for instance, has a 10-hour program. Some agencies are experimenting with online education.

Whatever the format, prepurchase education comes at little or no cost to the consumer — most agencies charge $25 or $50 to pull a credit report and for study materials. The counseling programs are usually financed by a mix of philanthropy, support from lenders and government money.

The government financing is shaky, however: in April, during Congressional talks to avoid a government shutdown, $88 million was cut from the Department of Housing and Urban Development’s counseling budget. (HUD-approved counselors can be found at the HUD Web site.)

Programs probably won’t be eliminated until at least the end of September, said Eileen Fitzgerald, the acting chief executive of NeighborWorks America, a nonprofit group. Ms. Briggs said that agencies like hers were adequately staffed. A consumer ready for counseling “could pretty much get in the next day,” she added.

Article source: http://feeds.nytimes.com/click.phdo?i=fe27a59894cc1eee6fa6043022555f5f