Urban Institute Evaluation 2011
In 2011, the Urban Institute completed a three-year evaluation of rounds one and two of the National Foreclosure Mitigation Counseling (NFMC) program. Using a representative NFMC sample of 180,000 loans and a comparison non-NFMC sample of 155,000 loans, the Urban Institute was able to employ robust statistical techniques to isolate the impact of NFMC counseling on loan performance through December 2010.
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The final evaluation of rounds one and two conducted by Urban Institute demonstrated positive effects for homeowners participating in the NFMC program. Counseled homeowners were more likely to receive better loan modifications, cure a serious delinquency or foreclosure and stay current, and avoid a foreclosure completion altogether.
Counseling greatly increased 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. A small part of this effect is attributable to the impact of counseling on the size of monthly payment reductions. However, a significant part is attributable to other positive impacts of counseling, such as helping homeowners improve their financial management skills and assisting them in managing relationships with servicers.
NFMC counseling made it more likely that homeowners would receive a loan modification cure in the first place – increasing by at least 89% the relative odds of modification cures for counseled homeowners compared to non-counseled ones. HAMP amplified this positive effect. In the period before HAMP, 8% of homeowners receiving counseling assistance had modification cures, compared to 5 percent who did not receive counseling. Post-HAMP, 17 percent of homeowners receiving counseling assistance had modification cures, compared to 9 percent without.
Counseled homeowners received loan modifications resulting in a monthly payment that was $176 less, on average, than non-counseled borrowers – a savings of close to $2,100 a year. This savings was achieved on loans modified either before or after HAMP was implemented.
Overall, the Urban Institute evaluation demonstrates that the NFMC program is having its intended effect of helping homeowners facing loss of their homes through foreclosure. The positive effects demonstrated in the final report are strong and are consistent with those found in prior analyses of rounds one and two.