NFMC Program Update : Counseling Impact Study & The Role of Compliance Testing

1. NFMC Program Update: Counseling Impact Study & The Role of Compliance Testing

2. NFMC Update 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.

3. 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.

4. 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

5. Data Sources & Methods • 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.

6. Counseling Improved Quality of Loan Modification • Counseling reduced monthly payment for loan modifications by an additional $176. • Results consistent both pre-and post-HAMP.

7. Sustainability Analysis • 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.

8. Counseling Increases the Likelihood of Obtaining a Modification Cure Estimated share of typical loans that cured a serious delinquency or foreclosure with a loan modification.

9. Counseling Increased Likelihood of Modification Cures Remaining out of Trouble Estimated share of typical loans that cured a serious delinquency or foreclosure with a modification and remained out of serious delinquency or foreclosure afterward.

10. Counseling Increases the Share of Seriously Delinquent or Foreclosed Loans that Cure and Sustain

11. Counseling Made It More Likely to Avoid a Foreclosure Completion

12. Key Takeaways • 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.

13. Report Summary • 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

14. Role of Compliance Testing “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

15. NFMC Compliance • 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 programgrantround. • NFMC test each Grantee and three sub-grantees for each HUD-ApprovedIntermediary and two sub-grantees for each Housing Finance agency and/or NeighborWorks organization, if applicable.

16. Types of Reviews • 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 by • NFMC staff • Occurs every round • Provides a real-time picture of issues in the current grant round

17. 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

18. 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)

19. Best Practices in Compliance • 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.

20. Contact Information Contact Us If you have any questions regarding this presentation, please contact: Tonya Sims Senior Manager, Quality Control & Compliance tsims@nw.org 202-220-6328