Tag Archives: Neighborworks

Home and Marriage

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The Pug Father

TheStreet.com quoted me in First-Time Homebuyers Often Wait to Buy House After Marriage. It reads, in part,

The number of people purchasing their first home, especially Millennials, could be impacted negatively by shifting demographics as the median age for marriage is rising.

A recent survey by NeighborWorks America, the Washington, D.C.-based affordable housing organization, found that 43% the respondents said they intended to buy a home when they “got married or moved in with a life partner.” The median age for a first marriage has risen to 29.3 years old for men and 27 years old for women, according to the U.S. Census Bureau. In 2000, men first got married at 26.8 years old while the median age for women was 25.1 years old.

Other respondents said they would wait to buy a home when other changes occurred, with 22% who will purchase one when they have children and 18% who are still seeking their first full-time job.

Many Millennials are delaying the purchase of a home because not only are they waiting until they are older to get married, a large percentage are also saddled with a large amount of student loans. The survey also demonstrated that 57% respondents admitted that student loans were either “very much” or “somewhat” of an obstacle, a rising concern compared to 49% who expressed this sentiment in 2014.

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“The state of the economy has interfered with their ability to maintain a steady income and this has likely delayed marriage,” said David Reiss, a law professor at Brooklyn Law School. “As a result, they are less likely to become homeowners.”

What’s more, the lack of job security in the current economy has dampened many people’s enthusiasm to own a home.

“Buying a home is a big commitment to your future self and your family: ‘I will make that mortgage payment come hell or high water,’” he said. “Fewer people are going to want to make that commitment if the job market does not give them a reasonable basis to believe that they can live up to it.”

The Low Cost of Homeownership

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TheStreet.com quoted me in Why the Extra Costs of Owning a Home Are Lower Than Consumer Expectations. It reads, in part,

First-time homebuyers are often apprehensive about the extra costs of owning a house, fearful that routine maintenance and repairs will add up quickly, exceeding their original budget.

But their estimates about replacing air filters, mowing the lawn and conducting minor repairs are often much higher than average costs. Consumers have trouble estimating the actual amount and said it would cost $15,070 for home maintenance repairs each year, according to a recent survey by NeighborWorks America, a Washington, D.C-based organization focused on affordable housing.

The actual amount is more likely to be in the range of 1% to 3% of a home’s value or $2,000 to $6,000 nationwide, said Douglas Robinson, a spokesman for NeighborWorks America. Even some current homeowners’ estimates were above the average amount and predicted repairs to cost $12,360. The perception among current renters was even worse with a prediction of $20,503.

“The important thing to remember about buying a home is that there are costs after the purchase that go beyond the monthly mortgage,” he said. “By setting up a savings plan and budget for these costs – items such as landscaping, air conditioning and heating system maintenance – a homeowner will be better equipped to take on the expenses without having to use a credit card or worse, a high-cost emergency loan.”

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Home Emergencies

While they might appear to be rare, homeowners annually should prepare themselves to handle at least one unexpected major emergency such as replacing the boiler or roof in the aftermath of a major storm or flooding in the basement where water needs to be pumped out immediately to protect the foundation, said David Reiss, a law professor at Brooklyn Law School. Establishing an emergency fund would help protect a homeowner when these problems arise so consumers are not forced to turn to more expensive options of debt such as credit cards.

“If a homeowner has an emergency fund, he or she will feel like a genius when it comes time to use it,” he said. “The next step, of course, is to start saving up immediately for the next problem because as most homeowners know – there will be a next problem.”

Some homeowners might find that chronic problems such as the leaky roof are worse than the “acute ones such as the boiler giving out in the winter,” Reiss said.

“This is because we will do whatever it takes to turn the heat back on,” he said. “But we learn to live with the occasional leak and end up feeling like we can ignore it. However, water damage is bad for a house and always gets worse.”

Foreclosed Between a Rock and a Hard Place

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miss justine

Congress has awarded NeighborWorks over $750 million for housing counseling since 2007.  NeighborWorks has submitted its most recent quarterly report to Congress on Foreclosure Counseling Successes & Challenges for its National Foreclosure Mitigation Counseling Program. NeighborWorks prepares different reports on outcomes for homeowners while the quarterly reports like this one focus on “successes and challenges of foreclosure mitigation counseling,” as the title of the report suggests. (1) Notwithstanding this limited focus, the report is structured in such a way that it makes me somewhat skeptical of the successes of foreclosure counseling.

The report summarizes the Program’s counseling successes as follows:

Foreclosure rates are waning nationwide; however, the crisis continues to plague many areas of the country in a significant way. Over the course of the NFMC Program, counselors have faced many successes and challenges as they provided foreclosure counseling. Despite many of the challenges counselors faced with foreclosure counseling earlier in the NFMC Program, they have risen to the task by streamlining operations, developing better relationships with servicers, cross-training staff, and expanding counseling services to meet the need of homeowners in crisis. NFMC counselors across the country continue to provide foreclosure mitigation assistance to homeowners with the funds appropriated by Congress. (2)

If you break this down, the successes are:

  • counselors have streamlined their own operations
  • counselors have developed better relationships with mortgage servicers
  • counselors have cross-trained staff
  • counselors have expanded their services

Not one of those successes actually talks about achieving efficiencies in the provision of services or improved rates of success for homeowners based on these changes. For instance, I would think that Congress would want to know whether streamlined operations resulted in more homeowners served and more positive outcomes for homeowners achieved. Discussing metrics that are solely internal to the program without any discussion of how those metrics impact the population to be served seems like a step in the wrong direction to me.

That being said, the report highlights the fundamental problems that homeowners in foreclosure face: “counselors for the NFMC Program continue to report that a big challenge is communicating with servicers. Lack of adequate homeowner resources also remains a persistent problem and is a growing challenge for counselors.” (2)

Recalcitrant banks and impoverished homeowners.  It sounds like counselors are stuck between a rock a hard place, much like the homeowners themselves.

 

Foreclosure Mitigation Counseling Works

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The Urban Institute published a study, National Foreclosure Mitigation Counseling Program Evaluation Final Report, Rounds 3 Through 5, that it prepared for NeighborWorks® America. The executive summary notes that

The National Foreclosure Mitigation Counseling (NFMC) program is a special federal appropriation, administered by NeighborWorks® America (NeighborWorks), designed to support a rapid expansion of foreclosure intervention counseling in response to the nationwide foreclosure crisis. The NFMC program seeks to help homeowners facing foreclosure by providing them with much-needed foreclosure prevention and loss mitigation counseling. The objective of the counseling services provided to clients is to determine the most appropriate solution, given a client’s circumstances and aid them in obtaining this solution. NeighborWorks distributes funds to competitively selected Grantee organizations, which in turn provide counseling, either directly or through Subgrantee organizations. (v)

The Urban Institute found that households counseled through NFMC were nearly 3 times more likely to have received a loan modification than non-counseled households. The authors estimate that “nearly two-thirds of the 151,000 loan modifications that NFMC clients received after entry into counseling would not have happened at all without the assistance of their counselor.” (vii)

On the one hand, these are very significant results and seem to validate this approach to foreclosure mitigation counseling. On the other hand, there is a lot of literature that calls into question the efficacy of various forms of financial counseling. It is important that this study be peer reviewed to ensure that its methods and conclusions are valid. If it holds up, it is equally important that we determine why this approach is so much more effective than many others.