Our Real Estate Blog

7 myths about HUD-approved counseling busted

April 16th, 2012 8:38 AM by Lehel S.

orrowers on the brink of losing their homes or are in need of advice often face unhelpful lender reps, or worse yet, unscrupulous companies who take up-front fees, promise housing relief and ultimately deliver nothing.

So, where can frustrated homeowners in San Diego County turn for information that’s spot-on, frank, and best of all, free?

The little-known answer is home counselors who are certified by HUD, the country’s housing agency. The typical clients who receive services approved by HUD — Housing and Urban Development — are low- to moderate-income homeowners who struggle to make their mortgage payments or want to buy their first homes.

But as the housing crisis drags on and more government aid becomes available, the share of higher-earning residents turning to counselors for help has risen, based on San Diego-area data and anecdotes from housing officials.

“We’re seeing more doctors, more engineers, people who are underwater,” said Appaswamy “Vino” Pajanor, president and executive director of Housing Opportunities Collaborative, among a dozen agencies that provide HUD-approved home counseling in San Diego County.

Related: San Diego borrowers seek help at 'foreclosure clinics'

Still, folks of all income levels tend to resist turning to these agencies because of the stigma attached to free services funded by the government. Other times, they simply don’t know the help is available.

“That’s especially the case for people who have been fully independent all their lives,” said Ali Tarzi, counseling supervisor at local non-profit Community Housing Works. “To them, it’s like admitting defeat. I think we should look at it as a wealth of resources available to empower a family.”

Here are seven common myths about HUD-approved counselors busted by the U-T San Diego to give you an idea of the benefits and limits of their services:

Myth 1: Counseling agencies help only low-income residents.

Fact 1: They actually help people of all income levels. More than 20 percent of the households helped by Community Housing Works in 2010 made more than $76,100, which is considered moderate to high income in San Diego County. Last year, that percentage rose to 24 percent. “There are absolutely no income requirements,” Tarzi said. “Anyone can qualify.” The highest-grossing income earner helped by that agency in 2011 made more than $320,000 a year. Before the foreclosure crisis, lower-income homeowners did receive the bulk of assistance, driven mainly from word-of-mouth references in disadvantaged communities, Tarzi added.

Myth 2: If the help is free, then the services I’ll get will be sub-par.

Fact 2: All of the home counselors of HUD-approved agencies are trained to understand the ins and outs of the housing market and government programs aimed at preventing foreclosures. Also, many of the counselors are former workers in the real estate sector, and thus, are familiar with what banks are seeking. Faith Espejo, education and counseling manager at the Housing Opportunities Collaborative, was previously a banker for more than 20 years. Also, HUD-approved agencies have direct connections to lenders and other resources that can expedite urgent cases.

Myth 3: If I pay hundreds of dollars for services to fight foreclosure, then I’ll get hundreds-of-dollars worth of quality help.

Fact 3: Companies that guarantee you a loan modification or foreclosure services if you pay them up-front are scams. They’re also illegal in California.

Roughly three in four people who come to the Housing Opportunities Collaborative for help have been at least approached by schemers who provide false hopes, from cleaning up your credit to helping you qualify for government programs, said Pajanor, with Housing Opportunities Collaborative.

Myth 4: Counselors certified by HUD assist only first-time homebuyers figure out their monthly budgets before buying.

Fact 4: They do much more. Most of the people who receive help need help figuring out whether their home is worth keeping. Some simply want advice in situations that include divorce.

How it usually works: A struggling homeowner calls one of these agencies and is interviewed to determine if face-to-face counseling is needed. If that’s the case, then the homeowner would come in and go through a more thorough questioning that covers finances and desired goals. Counselors then give their recommendations on proposed next steps.

The length of time of counseling process varies by case. “We make sure the homeowners are informed, so that if they lose their homes, they’re prepared,” Pajanor said. Homeowners also can get help at free foreclosure clinics that happen across the county. Important to note: Home counselors who are certified by HUD cannot operate on their own; they must work for an agency that’s also given HUD’s approval.

Related: List of HUD-approved housing agencies in SD

Myth 5: Once a sit-down is secured, I can let the counselor handle everything.

Fact 5: They can’t do everything and need your constant participation. HUD-approved housing agencies have small staffs and limited funding from the U.S. government. That’s why local agencies rely heavily on volunteers, from pro bono attorneys to real estate professionals.

Myth 6: I should only turn to HUD-approved counseling if I’m facing foreclosure.

Fact 6: You don’t need a hardship. Homeowners can be evaluated to see if they’re eligible for government programs, such as the Home Affordable Refinance Program, which reduces monthly mortgage payments even for borrowers who are underwater on their loans. Another popular program is Keep Your Home California, which helps homeowners catch up on mortgage payments, relocate after a short sale, or cut their principals.

Myth 7: Going to a counselor should be a last resort.

Myth 7: It should be a struggling homeowner’s first step, counselors say. Many times, borrowers come for help when it’s too late, or almost too late. “Normally, we see clients who already haven’t been paying (their mortgage) for a year,” said Espejo, with the Housing Opportunities Collaborative.

Want to contact a local HUD-approved counseling agency? Click here for a list.

Posted in:General
Posted by Lehel S. on April 16th, 2012 8:38 AM



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