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Reducing Unnecessary Foreclosures: A New Community-Based Approach

SVP Dwight RobinsonLast year Freddie Mac helped nearly 250,000 delinquent borrowers avoid foreclosure through loan modifications, forbearances, repayment plans or other alternatives, including modifications under the Obama Administration's ambitious Making Home Affordable program. These numbers reflect a vigorous commitment and ground-breaking tactics to reach borrowers in financial distress, connect them to their servicers, and expedite the workout process as much as possible.

On January 28, just a few weeks into the new year, Freddie Mac began building on that accomplishment.

Together with 13 of the country's leading nonprofit groups, we announced a two-pronged pilot effort to reach thousands of delinquent borrowers with free, confidential, holistic financial counseling.

"Holistic" financial counseling goes further than standard mortgage delinquency counseling and focuses on credit cards, auto loans and other credit problems that can directly affect the borrower's overall financial health. The purpose is help put borrowers back on their feet financially and not just to resolve their mortgage problem.

While working with non-profit organizations is not new for Freddie Mac, this initiative is different for at least three reasons.

First, it's more proactive. Instead of waiting for borrowers to call a counselor, we're working with the non-profit counselors to call them.

As part of this pilot, we're identifying the delinquent borrowers who never called their servicer for help or stopped trying because they were overwhelmed or discouraged by the complexities of the modification process, put off by the confusing and conflicting messages about efforts to reduce foreclosures, or some other reason.

The non-profit groups, in turn, are contacting the borrowers through letters or phone calls offering the free holistic counseling.

The second reason this initiative is different is that it makes the counseling more accessible in two ways. First, we've opened six new Freddie Mac Borrower Help Centers with participating non-profit organizations in Chicago, Phoenix, Washington, DC and California's Inland Empire.

The Centers in these test markets are equipped to provide borrowers with a dedicated counselor to review Freddie Mac and Making Home Affordable workout requirements, help clients apply for modifications, and supply missing information or documents needed to move an application forward.

To help borrowers effectively connect with their servicers the Borrower Help Center counselors will work with Home Retention Services, a subsidiary of Stewart Lender Services, Inc.

At the same time, we launched a separate Freddie Mac Borrower Help Network to offer the same counseling over the phone to borrowers in other markets.

The Borrower Help Centers and Borrower Help Network are staffed by such outstanding organizations as Home-Free USA in Washington, DC; several local Neighborhood Housing Services organizations; affiliates of the National Council of La Raza; chapters of the National Urban League; and other accomplished non-profits.

Why we are using these non-profit organizations to complete the interrupted circuit between the borrower and the servicer? Two reasons: reputation and impact.

The non-profit organizations we 're working with have established solid and trusted reputations in their respective communities. Based on our past success with non-profit organizations, we believe their reputations have the potential to overcome the misinformation, hesitation or frustration that are keeping some eligible borrowers on the sidelines of a workout.

At the same time, these organizations have the potential to make a significant difference in workout success rates. Specifically, a November 2009 study of 61,000 delinquent loans from NeighborWorks America found that borrowers are 60 percent more likely to avoid foreclosure when they receive counseling from a qualified non-profit organization during some stage of foreclosure.

As we enter the third year of the housing crisis, Freddie Mac's commitment and ability to reduce unnecessary foreclosures has never been more important. To fulfill that commitment we are working hard to assemble networks of community organizations and servicers who can reach the borrowers who can be helped, and help the borrowers willing to be reached.

Borrower Help - Participating Organizations

Freddie Mac Borrower Help Centers:

  • Chicago, IL: Latin United Community Housing Association Chicago Neighborhood Housing Services
  • California – Inland Empire: Neighborhood Partnership Housing Services
  • Phoenix, AZ: Phoenix NHS, Chicanos Por la Causa
  • Washington DC: HomeFree-USA

Freddie Mac Borrower Help Network:

  • National Urban League and its chapters in Broward County, FL and Hampton Roads, VA
  • National Council of La Raza (NCLR) and affiliates Southwest Housing Solutions (Detroit) and New Economics for Women (Los Angeles)
  • The Metroplex Economic Development Corporation (Dallas)
  • Korean Churches for Community Development
  • Boat People SOS

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