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NFMC Program Update: Counseling Impact Study &

The Role of Compliance Testing

NFMC recently released its 7th report to Congress detailing programmatic activity since the inception of the program.

The program has served 1.3 million homeowners.

To date, NFMC has awarded 583 million dollars in grants to 185 HUD-Approved Housing Counseling Intermediaries, State Housing Finance Agencies, and NeighborWorks organizations.

NFMC program grantees provided 37,777 homeowners with legal assistance counseling.

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NFMC Update

1,300 agencies operate under the NFMC program.

To date, 24 million allocated to training counselors.

10,853 scholarships provided to housing counselors for classroom training.

3 foreclosure e-learning courses created with NFMC funds.

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NFMC Update

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NFMC Program Evaluation

Final Report – Rounds 1 and 2

Primary Researchers:

Peter A. Tatian, Senior Research Associate Kenneth Temkin, Principal

The Urban Institute Temkin Associates

Neil S. Mayer, Principal Charles A. Calhoun, Principal

Neil Mayer and Associates Calhoun Consulting, LLC

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• Production data on clients served by NFMC Grantees and Sub-grantees in 2008 and 2009.

• LPS Analytics data on mortgage performance through 2010.

• From these sources Urban Institute produced two samples:– NFMC sample of 180,000 loans matched to LPS data.– Non-NFMC sample of 150,000 comparable

mortgagees. • Findings use statistical techniques to compare

outcomes between NFMC clients and unassisted owners who have observable characteristics that are similar to NFMC clients.

Data Sources & Methods

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• Counseling reduced monthly payment for loan modifications by an additional $176.

• Results consistent both pre-and post-HAMP.

Counseling Improved Quality of Loan Modification

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• Urban analyzed Round 1 and 2 clients and observed their loans’ performance through December 2010.

• Urban identified loans that were cured from either a serious delinquency (90+ days) or foreclosure with a loan modification or in another way, watching whether they again ran into trouble.

• Urban defined “recidivism” as a loan that either entered foreclosure or became seriously delinquent after the loan was cured and “sustainable” as cured loans that did not.

Sustainability Analysis

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Estimated share of typical loans that cured a serious delinquency or foreclosure with a loan modification.

1 2 3 4 5 6 7 8 9 10 11 120%

5%

10%

15%

20%

4%

6%

8%8%

12%

17%

2%4%

5%4%

7%

9%

Counseling started pre-HAMPCounseling started post-HAMPNever counseled, pre-HAMPNever counseled, post-HAMP

Length of Spell (Months)

Counseling Increases the Likelihood of Obtaining a Modification Cure

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Estimated share of typical loans that cured a serious delinquency or foreclosure with a modification and remained out of serious delinquency or foreclosure afterward.

1 2 3 4 5 6 7 8 9 10 11 120

10

20

30

40

50

60

70

80

90

100 94%89%

82%

80%

63%

48%Pre-cure counseling started post-HAMP

Never counseled, post-HAMP

Length of Spell (Months)

Counseling Increased Likelihood of Modification Cures Remaining out of

Trouble

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Loans Cured and Sustained per 100 Troubled Loans

With Counseling Without Counseling

Pre-HAMP Post-HAMP Pre-HAMP Post-HAMP

Modification Cures Sustained 5.5 12.5 1.4 4.4 Non-Modification Cures Sustained 3.8 5.9 2.3 6.8 Total Loans Cured and Sustained 9.3 18.4 3.7 11.2

Counseling Increases the Share of Seriously Delinquent or Foreclosed Loans

that Cure and Sustain

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 200%

5%

10%

15%

20%

25%

2%

5%

9%

12%

4%

9%

14%

20%With counseling

Without counseling

Months After April 2009

Share of loans that had a foreclosure completion

Counseling Made It More Likely to Avoid a Foreclosure Completion

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• Counseling greatly increases the ability of homeowners to stay current once they cured a serious delinquency or foreclosure. Counseled homeowners were at least 67 percent more likely to remain current on their mortgage nine months after receiving a loan modification cure. 

• NFMC counseling made it more likely that homeowners would receive a modification cure in the first place – nearly doubling the odds of modification cures for counseled homeowners compared to non-counseled ones.  

• Counseled homeowners received loan modifications resulting in a monthly payment that was $176 less, on average, than

non-counseled borrowers.

Key Takeaways

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NFMC counseling

Improved the quality of loan modifications

Increased the cure rate of serious delinquencies and foreclosures

Improved the sustainability of loans that cured

Reduced the number of foreclosure completions

Report Summary

Role of Compliance Testing

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“Compliance testing reminds me of when I was in school and had to take a test; I would always hope to pass with flying colors, but never

knew for sure”. Anonymous

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NFMC views compliance testing as a way to ensure its Grantees understand the terms and conditions of the NFMC Grant Agreement and Funding Announcement.

The program conducts Standard and Random testing for each program grant round.

NFMC test each Grantee and three sub-grantees for each HUD-Approved Intermediary and two sub-grantees for each Housing Finance agency and/or NeighborWorks organization, if applicable.

NFMC Compliance

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Standard Reviews • Conducted by a third-party contractor• Occurs every two rounds• Conducts both desk reviews and on-site reviews

depending on the risk rating of the Grantee

Random Review• An in-house desk review of only client files conducted

byNFMC staff

• Occurs every round• Provides a real-time picture of issues in the current

grant round

Types of Reviews

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Compliance Review Numbers• Rounds 4 & 5 Standard Compliance Reviews

– 148 Grantees Reviewed– 35 Grantees Received On-site Reviews– 4,248 Client Files Reviews

• Round 5 Random Review– 136 Grantees Reviewed– 648 Client Files Reviewed– 4% of Client Files had Findings after an Appeal

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Responsibilities of Grantees•Insurance documentation•De-obligation/Recapture•Match Documentation •Extensions• Audits •Disbursements• Record Retention •Post Award Requirements

•Client Files•Tracking Expenditures•Translation Services•Disability Access•Sub-grantee monitoring (if applicable)•Counseling Quality•Training requirements•Geographical requirements (MSAs)

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Communication: Communication is important so that Grantees understand the requirements of audits, addendums, deadlines, extensions, and recapture/de-obligation.

Organization: Sufficient organization is necessary in administering multiple compliance projects in a timely manner.

Preparation: Preparation helps the compliance programs run more smoothly by troubleshooting issues before they happen.

Best Practices in Compliance

Contact Us

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If you have any questions regarding this presentation, please contact:

Tonya SimsSenior Manager, Quality Control & Compliance

tsims@nw.org202-220-6328

Contact Information