Homeownership Built to Last: Balancing Access, Affordability, and Risk after the Housing Crisis

13. Engaging Distressed Homeowners

397 13 Engaging Distressed Homeowners mark cole For most families, a central part of the American Dream has been the goal of homeownership. In 2004 consumer attitudes, public policy, and the private sector were all integrally involved in driving the rate of homeownership to a record high of 69 percent.1 The prevailing opinion was that homeownership was a sound economic investment and that it built stronger families and enriched community life. However, the Great Recession and the lingering economic hardship afterward had a devastating effect on individuals, families, neighborhoods, and communities across the United States. The record numbers of unemployed and underemployed, foreclosures, significant drops in home values, and loss of retirement savings and investments caused many to question this conventional wisdom as they grappled to understand and solve these problems. Many factors can threaten the sustainability of homeownership, including income and budget shocks, life events, unexpected repair costs, falling home prices, and interest rate risk. These and other challenges encountered in the past few years have caused many to reassess the value of homeownership and forced everyone to reconsider the way they think about the loss of their home. This chapter offers insights on these factors through data on the individuals and families who sought help from a housing counseling organization during this tumultuous period. By assessing the data and performance from a variety of the agency’s programs and services, we can gain insights into how to help 1. Joint Center for Housing Studies (2012). 13-2564-0 ch13.indd 397 5/14/14 11:04 AM 398 mark cole homeowners resolve mortgage delinquencies and help others ultimately achieve sustainable homeownership. CredAbility is a full-service, nonprofit, financial counseling agency headquartered in Atlanta, formerly known as CCCS of Greater Atlanta. Founded in 1964, CredAbility provides bilingual, personal, round-the-clock counseling in five states in the Southeast and, via telephone and the Internet, to people in all fifty states. CredAbility is a HUD-certified national intermediary and a member of both the National Foundation for Credit Counseling and the Homeownership Preservation Foundation. Its mission is to help people resolve financial challenges and build economic security for themselves and their families. It uses comprehensive , holistic counseling to help clients assess their situation, set priorities and clear goals, and establish a realistic, written action plan to achieve them. It has helped more than 3 million households nationally since 2007 through its preventive and remedial services. Although CredAbility offers a broad range of education and counseling services , I focus here on the challenges distressed homeowners face and how new methods of outreach and approaches to providing support are improving their likelihood of sustaining homeownership. Specifically, I review counseling data on foreclosure prevention, early intervention, and the support program after loan modification. The counseling data offer a view of who is seeking help and the challenges they face in sustaining homeownership. For delinquent homeowners discouraged from trying to resolve their delinquency, early intervention by nonprofit counseling agencies can encourage them to act. Many attempts at loan modification failed because they did not address the family’s entire financial obligations . Ongoing engagement after a loan modification makes a significant difference for financially fragile families as they recover and rebuild their financial lives. The data offered here represent the personal stories of millions of people who have faced a potential or an actual loss of their home. The chapter tries to answer two questions: What should we—as counselors, policymakers, lenders, government, friends, and community leaders—do to help these people? And, What should they do to address their situation? The answers are vital to both the national economic recovery and to the prevention of another such crisis in the future. The Historic Scope of the Problem Before I review the data or explore the effectiveness of the programs, I want to fully consider the challenges average families (low-to-moderate income and struggling middle class) faced during the Great Recession. There is a variety of tools and indexes to assess individual components at a macroeconomic level, but none of these measures tells the story from the individual family’s perspective and 13-2564-0 ch13.indd 398 5/14/14 11:04 AM engaging distressed homeowners 399 none looks holistically at the key elements of what average families face. CredAbility , with its nearly fifty years of experience in helping consumers in financial distress, built the CredAbility Consumer Distress Index to...