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.

But there’s another reason IFR letter recipients — or anyone looking to get their finances back on track — should consider calling our housing counselors at 1-888-995-HOPE for assistance.

Although many people know about HPF for the foreclosure counseling work we do, our mission is quite broader than that. It’s about helping homeowners get all their finances back on track. After all, rarely is it just the mortgage keeping distressed homeowners awake at night. It’s also the maxed-out credit cards, dwindled savings account, high-interest-rate store credit card balances, the unavoidable student loan payments, the unpaid utility bills, and past-due car loan obligations, too. Such daily financial stress is an all-too-common reality for many American households.

Ideally, to help fix the one is to address the others — and that’s what HPF counselors do through our comprehensive counseling service (which is also free of charge).  And it truly can help.

What exactly is comprehensive financial counseling (or as we prefer to call it, “financial coaching”)?

At HPF, it means working with a trained, professional financial coach over the phone to figure out a realistic budget and action plan that takes into account all your expenses and gets you to your financial goals at a pace that makes sense for you. HPF’s coaches can help you figure out which bills to pay down first, which credit cards to use only in emergencies, and help create a realistic monthly budget that allows homeowners to remain current on all of their monthly obligations. The coaches’ insights can be of particular benefit to consumers who receive one-time, lump-sum funds — such as an IFR settlement check, to bring this discussion back full circle — and aren’t sure how best to allocate them across their financial obligations.

While the coach helps with the immediate need of making a workable plan, it’s equally important to point out that he or she also gives you the insights and financial wisdom you need to make better educated decisions on your own about your personal finances for the long term.

If financial coaching sounds like it can help you, please give us a call.  There are no lectures or harsh judgments on how you’re spending your money — just independent, confidential guidance and support.

As a partner of the Loan Modification Scam Prevention Network – a national anti-scam effort comprised of multiple organizations that runs the Loan Modification Scam Alert Campaign – HPF is supporting NCPW by educating homeowners on loan modification scams and directing them to free, legitimate mortgage resources, including our HOPE Hotline.

HPF reminds consumers that one of the leading signs of a loan modification scam is when an individual or organization requires an upfront fee for a loan modification service; doing so is illegal, which is why consumers can call our professionally trained counselors to receive loan modification counseling free of charge.

HPF also encourages consumers to be wary of web-based loan modification services that “guarantee” modifications, since only lenders can guarantee a mortgage solution.

If you or someone you know has been the victim of a scam, call 888-995-HOPE (4673) to speak with an HPF counselor for free. You can also visit our scam warning signs page to learn more about how to avoid being scammed.

Click here to read the news release about the Loan Modification Scam Prevention Network’s support of National Consumer Protection Week.

Q: HPF uses the MortgageKeeper service to direct the distressed homeowners who call our HPF HOPE Hotline at 888-995-HOPE (4673) to local community services that can help consumers get back on track with their finances. Can you explain how you came up with the idea for MortgageKeeper and how it evolved into the business it is today?

A: I worked in community development for many years.  One of my frequent collaborators was Dr. J. Michael Collins, a professor at the University of Wisconsin-Madison, who had been researching consumer behavior for the housing and mortgage industry.  We knew from our experience that more should be done to connect homeowners in need with local services that could assist. Too often, people did not know where to go for help and ended up in the hands of unscrupulous actors offering to “help.” Servicers didn’t have the bandwidth to know the local markets for each of their delinquent homeowners.  MortgageKeeper (MK) was the logical solution to both problems, and in 2005 we put it together.

Q: What are the services that homeowners are most often referred to?

A: Currently our top three service categories are food assistance (which tells us that people are facing some big financial challenges), utility payment assistance, and housing counseling, which is the referral most used by HPF.  These have stayed pretty consistent over the past year.

Q: What is the largest trend you’ve identified in terms of how the MortgageKeeper system is being used?

A: We’ve seen an increase in demand for rental housing options that wasn’t really expected. MK was created to help more homeowners stay in their homes, but it was gratifying to learn our local resources can help anyone, regardless of their housing status.  Since some homeowners have to transition from ownership to affordable rental housing, our services are still very much needed.

Q: You recently reported that 900,000 homeowners were referred to local assistance via MortgageKeeper in 2012, which was a 34% increase from the year before. Can you tell us what you attribute that jump to?

A:  More organizations are turning to MK to help them connect their customers to local help.  In addition, times continue to be tough and more and more people need assistance as their income remains low and they look for suitable employment.  Last year also brought a new release of our desktop application, which made using MK easier for our clients.

Q: In November, military resources were added to the MortgageKeeper database to help struggling veterans. What are other resource categories that you have recently added or plan to add in the future?

A: In partnership with HPF, a recent addition was state-by-state foreclosure law summaries for counselors.  We’ve also added rental housing because unfortunately not everyone is able to stay in their home, and we want to make sure that their transition from a house to a rental goes as smoothly as possible.  Next up we will be adding a disaster relief category.  Our clients will be able to easily refer a homeowner to the appropriate agency or service provider.  With that framework in place, we will be able to quickly upload assistance resources that spring up to serve the need when disaster strikes.

Q: In your experience, what is the most surprising thing that you’ve encountered in terms of how the referral system is used?

A:  It has to be the consistent usage of our products.  Month-to-month, year over year, our subscribers are logging in.  Every day they access the tools and refer consumers to support and options they previously did not know existed.  Even after many years, most subscribers today see their usage hitting all-time highs.  And while this is surprising, it’s also tremendously gratifying to know that people are getting connected with organizations that can help them.  It’s why I love my job.

Rochelle Nawrocki Gorey, President/Co-Founder of MortgageKeeper Referral Services, has more than 20 years experience in housing policy research—research made practical by applying it to issues like homeownership, mortgage default and foreclosure, and financial literacy. She has co-authored various publications and training materials related to foreclosure intervention strategies and loss mitigation best practices. Rochelle is also sought out as a speaker, most recently at the Annual Meeting of the American Bar Association.

In our experience, rarely do mortgage delinquencies occur in a financial vacuum. A study published by TransUnion last year, for example, found that more than 60% of people who were delinquent on their mortgage were also behind on their auto loans and credit cards. It’s an all-too-common scenario.

So, while every one of the counselors are HUD-approved, housing counseling specialists, the vast majority of them are equally prepared to provide more holistic financial counseling to homeowners who need guidance with getting all their finances back on track.  They will help the caller look beyond just the immediate issue of addressing the foreclosure worries, and help them create monthly budgets and realistic “pay back” schedules to clear debts, understand better where and how they are spending their money, and ultimately restore their financial footing.

Although we are known for our housing counseling expertise, having this “big picture” financial counseling knowledge and offering it to interested homeowners through our counselors certainly makes sense.  Logic suggests that someone looking to prevent foreclosure (or, after having received a loan modification, are looking to stay current) has a far greater chance of doing so by getting all his or her finances in order.

The more complete a picture our counselors have of your financial situation, the more likely it is that we can help you manage it — all of it.  And while the thought of sharing all the details of your financial life to an outsider over the phone may seem a bit uncomfortable at first, we really are just here to help. Our counselors don’t judge people or lecture them for how they’ve been handling their finances. Quite the contrary — we understand that personal finances, like life, can get messy sometimes through no fault of your own. Holistic counseling is an ideal way to begin to mop it up when it does.

If holistic counseling sounds like something that could benefit you, just call our Homeowner’s HOPE Hotline at 888-995-HOPE today and let your counselor know.

The survey found that more than 40 percent of its clients with student loans weren’t aware that they could possibly qualify for a lower monthly payment schedule because of a layoff or another economic adversity.  Some 27 percent were struggling to make payments, were close to missing them, or were already in default.  More than 50 percent had more than $25,000 in student debt.

Student loan debt is approaching crisis proportions, but the problem can’t be looked at in isolation.  Throughout the housing crisis we have observed that debt issues often overlap – in addition to mortgage problems, many of the homeowners who call HPF’s Hotline are also having trouble making credit card, auto, and student loan payments.

Consumers who are struggling with student debt must seek comprehensive credit counseling, not just a solution for their student debt.  Failure to do so will result in them becoming like the proverbial Dutch boy with his finger in the leaking dike.