As Director of a Housing Counseling program, I constantly get the inevitable question: are any of these programs to help Homeowners out of foreclosure actually working? Each time my answer is the same...YES!
But first I should likely back up and give some background on the subject. Open Communities (formerly Interfaith Housing Center of the Northern Suburbs) started to see patterns of predatory lending in Evanston in the mid 1990s. As a fair housing agency, it was an issue that we decided to focus on because it threatened the stability of the community and it threatened wealth of those families impacted by jeopardizing their asset, their home. Predatory lending was a phenomenon which targeted lower income communities, people of color and seniors. When the height of the housing market was booming and homes appraised at record numbers, this was a perfect scenario for unsuspecting Homeowners to refinance, take out HELOC loans or even reverse mortgages. There were two problems here: 1) many Homeowners didn't understand the type of loan they were signing and 2) there were many tricks used by some Brokers such as 'bait and switch' or falsifying information on the loan application to get the Homeowner approved.
Fast forward...while there are still some remnants of predatory lending impacting these same communities, a larger reason for the foreclosure crisis is related to many Homeowners facing a real financial hardship. (At one point, there were many misconceptions that ALL Homeowners in foreclosure put themselves there because they bought a home they knew they couldn't afford, not true). These hardships range from divorce, loss of income, a failed business venture, medical expenses or illness to name a few. When the Making Home Affordable Program was announced, the goal was to help Homeowners who were facing foreclosure. Lenders who signed onto the program could offer some of the best loan modification terms to help these Homeowners stay in their homes. In this regard, this program has been successful.
Homeowners who are facing foreclosure should definitely contact their local HUD certified counseling agency for housing counseling. A Housing Counselor will sit down with you to discuss options which may be available and going over all financial information to assess affordability. While there are companies who charge a fee for this service, it does not guarantee a loan modification and it is illegal in the state of Illinois.
Programs like Making Home Affordable will not solve the entire foreclosure crisis, but it has definitely been part of a positive force to keep families in their homes. There will be no one program, but this program is definitely a start.