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

 NFMC recently released its 7 th 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. 2 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. 3 NFMC Update

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 Production data on clients served by NFMC Grantees and Sub-grantees in 2008 and LPS Analytics data on mortgage performance through 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

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

7 Urban analyzed Round 1 and 2 clients and observed their loans’ performance through December 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

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

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

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 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

13 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 14 “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 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

16 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 Types of Reviews

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 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 20 If you have any questions regarding this presentation, please contact: Tonya Sims Senior Manager, Quality Control & Compliance Contact Information