A recent New York Times article focuses on Fannie Mae’s HomeSaver Advance Program, a now-deemphasized program that gave borrowers up to 15,000 in unsecured personal loans to cover missed mortgage payments. However, 70% of the borrowers who took out these loans defaulted. This instance helps highlight the importance of financial counseling. The article closes with the example of a New York City program that makes foreclosure avoidance loans available to borrowers who have undergone counseling. This program has given out 15 loans so far, none of which have defaulted.
Reverse mortgage counseling has come under fire recently, and several states have been debating whether to pass legislation requiring counseling before all reverse mortgage transactions. It is often argued that counseling is necessary in order to ensure that the senior borrower understands the reverse mortgage transaction, but if one looks closely, it appears that counseling has the potential to do a lot more than that. As counselors at the NRMLA Orlando Road Show explained, the purpose of counseling is partly to make sure that the borrower will still have enough money to live on after the reverse mortgage. The financial counseling portion of the reverse mortgage counseling process is perhaps underestimated, but it articles such as the one referenced above help show that financial counseling may be another way to help homeowners avoid foreclosure–and ensure that the steps they take in the short term will not penalize them in the long run.