Real estate website Zillow yesterday released results from its Mortgage Marketplace Survey, which found that one-third of homebuyers do not fully understand the basic terms of a mortgage, like down payments, lender rules, and mortgage rates. According to the survey, around 25 percent of homebuyers incorrectly believe that they are required to close their loan with the lender that pre-approved them.  In reality, prospective homebuyers should shop around for a loan that fits their unique financial needs rather than always go with the first bank that pre-approved them.

The survey also reported that one in five – or roughly 14 million homeowners –believe that underwater borrowers are unable to refinance their home loans. This is simply not true – to date, a significant portion of the 2.3 million homeowners who refinanced their mortgages via the Home Affordable Refinance Program (HARP) were underwater. Information about HARP, which has been extended through December 2015, is available by speaking with an HPF counselor at 888-995-HOPE (4673).

In addition to the evidence provided in the Zillow survey, last week’s HPF blog post discussed a recent academic study published by the Yale Law Journal, which found that, when presented with mortgage documents, homebuyers’ eyes focus more closely on language that is easy to comprehend rather than on the more complicated information. This leaves homebuyers’ susceptible to agree to terms they don’t understand, which could potentially harm them in the long run.

As with any other important financial decision, HPF urges homeowners to do their homework before taking out a mortgage. Taking the time to fully understand the terms of your mortgage and what the details of your loan entail is one of the first steps to take on the path to sustainable homeownership.

A new academic study, reported on last week by Chicago Tribune ‘Homefront’ reporter Mary Ellen Podmolik, found that, when presented with financial documents, people’s eyes focus more closely on the language that is easiest to understand while glossing over the more complicated information. For example, a homeowner may decide on an adjustable-rate mortgage (ARM) after eyeing the initial low monthly payment, never fully realizing that the interest rate reset will result in a higher payment a few years down the road. An ARM reset, coupled with an unforeseen job loss or wage reduction, could challenge a homeowner’s ability to make their mortgage payment. This was the unfortunate scenario that put many homeowners in danger of losing their homes over the last few years.

The academics behind the study suggest that homeowners be required to pass a financial literary test before securing a mortgage – those who fail the test would then be required to undergo housing counseling. Counseling prior to taking out a mortgage, otherwise known as pre-purchase counseling and education, has proven to be an effective tool in preparing people for homeownership; in fact, a recent study found that those who completed pre-purchase counseling and education are one-third less likely to become seriously delinquent on their mortgage within two years of the loan origination. Similarly, another recent study from Freddie Mac found that pre-purchase financial counseling may reduce the delinquency rate of first-time homebuyers by an average of 29 percent.

These two studies, together with the newly released academic study, illuminate a greater need to help homebuyers understand the terms of a mortgage before they sign the dotted line. With this in mind, HPF urges all prospective homebuyers to do the homework and research they need to make the most appropriate mortgage decision in order to achieve sustainable homeownership.

Tip #1 | Check to see if you qualify for the various government-sponsored programs for homeowners

There are several government programs available to homeowners who have been affected by the housing crisis. For example, the Obama Administration’s Making Home Affordable (MHA) program offers a refinancing option for homeowners who are underwater on their mortgage as well as a modification program for those who are struggling financially and may qualify for a modified payment plan. Both of these programs expire at the end of 2013, so now is the time to see if you qualify.

There are also special programs for service members, those who are unemployed, and homeowners who may be looking to make a graceful exit from their home via a short sale. HPF counselors, who are available by calling 888-995-HOPE (4673), can walk homeowners through all of these programs and their corresponding application processes.

Tip #2 | Use free online resources to evaluate your finances

Take advantage of the financial tools and information that are available for free online. Money Management International (MMI), one of HPF’s counseling agency partners, created FinancialLiteracyMonth.com, a website that supports Financial Literacy Month by offering free financial wellness webinars, worksheets, and eBooks.  Additionally, HPF’s website includes several tips on managing credit cards, utility payments, and education expenses via its “Homeowner’s HOPE Hotline Guide to Saving Money” page; the website also offers a large list of government and financial industry resources that can help struggling borrowers.

Tip #3 | Avoid scams

Unfortunately, there are many unsavory individuals out there who prey on financially-strapped consumers, either by convincing them into financial products that can be harmful or offering “too good to be true” debt rescue schemes. Before entering into any financial agreement with an organization, do your research to make sure that the organization is legitimate. Even a quick “Google” search can reveal negative consumer reviews on a particular organization or an “F” ranking from the Better Business Bureau, which are immediate red flags.

If you believe that you have been the victim of a financial scam, report it to the Consumer Financial Protection Bureau (CFPB). Foreclosure-related scams can also be reported to HPF’s anti-scam team at 888-995-HOPE. These complaints are then used by law enforcement agencies during their investigations into fraudulent activity.

As financial columnist Michelle Singletary mentioned in the Washington Post earlier this month, April is the perfect time to revisit your finances, considering that you’ve likely had to compile all of your financial information in order to file your taxes. We couldn’t agree more, which is why we hope you will use this month to learn more about personal finance and apply the knowledge you gain to make better-informed financial decisions.

Mr. Segal’s February 23 column particularly resonated with me.  In January, he was contacted by a robocaller offering an opportunity to lower his credit card interest rates.  Mr. Segal was immediately suspicious of the offer and decided to investigate the company.  It turns out that the company is run by a Florida couple who, according to Mr. Segal, control other outfits that were sued by the attorney general of Arkansas for violating various laws, including the Telemarketing Consumer Fraud and Abuse Prevention Act.

Mr. Segal is understandably outraged that the company continues to find new ways to operate, but he shouldn’t be.  Stamping out individuals bent on preying on unsuspecting consumers is akin to playing Whac-A-Mole – you stamp them down and they often instantly appear elsewhere.

HPF’s HOPE Hotline has received more than 30,000 reports of alleged mortgage scams in the past three years.  Many of the scamsters are repeat offenders – they get charged and then reemerge doing business under a different name.  They know how to circumvent the legal system and are quite sophisticated marketers.  Indeed, when Mr. Segal asked the robocaller where he was located, the person knew to terminate the call.

So take a bow, Mr. Segal, for doing your part to protect consumers in advance of National Consumer Protection Week.  And if you want to help stamp out the rapidly growing legion of mortgage scamsters, tell your readers to call the HPF HOPE Hotline at 888-995-HOPE (4673) to report suspected mortgage fraud. Reported scams are put in a database that is accessed by various law enforcement agencies.  And let your readers know that, if they are in need of FREE loan modification counseling, they can get it simply by calling the HPF HOPE Hotline.

Anyone who demands upfront fees for loan modification counseling is not worth listening to. Especially if the person making the offer is a robocaller.

These statistics are contrary to the many indications that the housing market is in recovery: CoreLogic reported that housing prices are up; RealtyTrac says foreclosures are down; and the US Census Bureau announced that homes are once again being built. These improvements, all reported by extremely credible sources, are very good news for homeowners, especially those who are underwater on their mortgages or whose home values have depreciated because of an abundance of distressed properties in their neighborhoods.

The devil, however, may lie in the details. RealtyTrac’s data reports that, while down on a national average, foreclosure activity has increased in 57% of the nation’s metropolitan areas.  In Tampa, Miami, Baltimore, Chicago, and New York, the housing crisis is far from over. Additionally, CoreLogic’s foreclosure report noted that the 56,000 foreclosures completed in December, while down year-over-year, was still nearly triple the pre-crisis foreclosure level.

And here’s another sobering statistic: as previously reported, there’s been a dramatic increase in calls from homeowners who are current on their mortgages but are in danger of default. HPF counselors continue to remain busy helping homeowners build the budgets and find the solutions that will help them avoid foreclosure.

If you or someone you know is having trouble making mortgage payments, counselors are available to assess your financial situation. Call 888-995-HOPE (4673) to find out more.

As our directors don’t get public recognition for their HPF board work, we take satisfaction when they are honored for their other accomplishments. So we are incredibly proud that founding member and longstanding board member Sharon Sayles Belton is having a Minneapolis bridge named in her honor.

Ms. Sayles Belton is a former two-term Mayor of Minneapolis, where HPF is headquartered.  Sharon’s major accomplishments during her tenure include revitalizing one of the poorest neighborhoods in Minneapolis through public safety, job creation, and quality housing initiatives. It was also during Sharon’s tenure that the Minneapolis Convention Center, one of the city’s most important assets, was built. The bridge that will be renamed for Sharon, also constructed during Sharon’s term as mayor, connects the Convention Center with the Minnesota African American Museum. Sharon was the first woman and first African American to serve as mayor of Minneapolis.

Sharon is currently the Vice President of Government Affairs and Community Relations at Thomson Reuters Legal, where she directs government affairs activities affecting all Thomson Reuters businesses, customers, and employees; she is also responsible for the company’s Community Relations activities. Additionally, Sharon is a senior fellow at the Hubert Humphrey Institute at the University of Minnesota.

The Frank Lloyd Wright-inspired Minneapolis bridge, currently known as the Third Avenue South bridge and located over Interstate 94, will be renamed the “Sharon Sayles Belton Bridge” and renovated to feature public artwork honoring Sharon’s achievements as mayor. Sharon was instrumental in transforming Minneapolis through public art and was responsible for renovating the city’s historic theaters and bringing housing, entertainment, and culture back to the city’s neglected Mississippi Riverfront communities.

We salute Sharon for all her impressive accomplishments serving the residents and businesses of Minneapolis and are grateful for her continued service on HPF’s Board.

Click here to read the official announcement of the bridge rededication.

Regardless of who we are talking to, however, one of our core messages remains the same and that is, simply, that housing counseling produces results; after undergoing counseling, more homeowners are able to save their homes, avoid foreclosure, understand their finances, and regain financial stability.

In the last year or two, there has been a great deal of compelling research from HUD, Harvard University, The Urban Institute, and other reputable sources that easily make that case. HPF probably has a filing cabinet’s worth of data, stats, and research at this point that indicates the myriad ways in which housing counseling is a good use of time, effort, and resources for homeowners, their lenders, housing sector investors, the government, local communities, and the economy.

That said, this story by Lew Sichelman, a syndicated columnist who has been covering housing and real estate for decades, does a superb job of hitting some of the highlights. If you’re wondering whether housing counseling can help you with your mortgage challenges, I strongly encourage you to read Mr. Sichelman’s article and then to call our HUD-approved counselors at 888-995-HOPE (4673).  Housing counseling can help.  There’s no reason to try to tackle your financial crisis alone.  Let our counselors work with you to find the best possible solution for you and your situation.

As always, we’d love to hear your thoughts here, on our Facebook page or via Twitter.

The latest $8.5 billion foreclosure settlement with 10 mortgage servicers has been heavily criticized since it was announced last week. Many consumer groups believe that the settlement does not go far enough to rectify the damage that the banks caused, which is true – $8.5 billion does not cover the trillions of dollars in home equity that were lost throughout the crisis.  Meanwhile, banking industry supporters point to the lack in qualified Independent Foreclosure Review candidates as vindication that banks really did nothing wrong, as noted in this Forbes article.

The truth is, there was wrongdoing at the hands of the banks – we are a nation of laws, and the procedures and rules that banks have in place for struggling borrowers were not followed. Robo-signing and predatory lending are not mere “technical violations” when it results in someone losing their home. That compensation be available to consumers whose housing issues were exacerbated by fraudulent foreclosure practices is a small step in the right direction.

The settlement specifics include a $3.3 billion portion that will be distributed to more than 3.8 million consumers who were pre-qualified for the expired Independent Foreclosure Review (IFR) program – that’s $3.3 billion that will be sent out directly to homeowners. We are fully in support of consumers receiving $3.3 billion dollars. We also support the idea that the settlement will be distributed quickly – the Office of the Comptroller of the Currency (OCC) and Federal Reserve Board announced that they expect to have a payment agent contact all eligible consumers by the end of March. This ambitious timetable greatly differs from all previous relief programs, which were often criticized for having lengthy, biased review processes that were mired in red tape.

In the days going forward, more details will emerge on how the settlement will work, including how the additional $5.2 billion in mortgage relief will be disseminated to those in need. Recently it was reported that payouts for those who qualify for IFR compensation will average around $15,000, with those who were most harmfully affected receiving closer to $125,000. We know first-hand how much this money means to people as we speak with thousands of financially strapped consumers around the clock, 365 days a year.

At the end of the day, the IFR foreclosure settlement is another tool available to distressed homeowners who were wronged. The OCC and Federal Reserve Board deserve credit for taking time to adjust the broken IFR program and revamp it in a way that will reach more consumers and at a faster pace than before.

In his piece, reporter Christopher Matthews argues that recent housing sector improvements, such as the rise in home prices and decline in foreclosure activity, will not result in a meaningful recovery unless unemployment drops or wages increase. His insights match what we hear every day first hand from the people who call our Homeowner’s HOPE Hotline at 888-995-HOPE. Rare indeed is the struggling homeowner who is behind on his or her mortgage, but current with all the other average household debts, such as car loans, utility bills, student loans, and the like. Unemployment, underemployment, unexpected medical bills…. any of these life challenges could significantly change someone’s ability to stay afloat – and can do so practically overnight. Accordingly, homeowners who are current with their payments today but are living off their savings or are making ends meet paycheck-to-paycheck could easily join the millions now facing foreclosure if their funds dry up.

Our view on what’s ahead?  First, that the threat of foreclosure will remain a harsh reality for millions of American homeowners. While the crisis may be abating nationally, it is far from over. While we expect to receive calls to our HPF HOPE Hotline from thousands of homeowners every week, we know that many more will not reach out for foreclosure prevention guidance, either to HPF housing counselors or their bank. These hard-to-reach homeowners often struggle alone to remedy their challenges out of a sense of hopelessness, fear, indecision, lack of trust, embarrassment or some combination of all these and other emotional and attitudinal triggers. HPF will continue to work aggressively in the year ahead to try to connect with these homeowners and help them see that foreclosure is not the only option.

Also, as previously reported, we’ve seen a dramatic increase in calls from homeowners who are current on their mortgages but are in danger of default; we expect that trend to continue in 2013.  More and more homeowners are calling to speak to our housing counselors before they get behind on their payments. Our counselors have helped untold numbers of homeowners hold onto their homes by taking a broader view of their financial picture and making meaningful changes in their spending habits to follow more realistic budgets.  We expect that this already- underserved need among concerned homeowners for such reliable, holistic one-on-one financial counseling that’s available at their convenience to grow in 2013.

FYI:  Those interested in learning more about what may be ahead for housing may be interested in a recap of a five-part series of 2013 housing predictions in the Wall Street Journal; it notes that the housing market remains fragile due to the number of underwater borrowers, but also predicts that the “shadow” inventory will continue to shrink and that credit-lending standards will remain tight in 2013.

Wishing you all a happy, healthy, and financially stable 2013.

In the Hoffmans’s case, a letter from the OCC and Treasury’s Independent Foreclosure Review program prompted them to reach out for additional guidance despite already having tried countless solutions beforehand. After being transferred to an HPF housing counselor at 888-995-HOPE, the Hoffman’s discovered the benefits of working with a neutral, third party expert and were able to reach an agreement with their servicer within weeks.

Thanks to the Hoffmans for sharing their story, and to the Beacon’s Mary Delach Leonard for reporting it so passionately; it’s stories like these that inspire other homeowners facing foreclosure to reach out for help and to not give up.