Counseling Reduces Low-Income Foreclosures.

Washington-Responsible one-on-one counseling combined with long-term financial planning and in-house origination-to-servicing appears to be an efficient strategy that minimizes foreclosure rates, especially among "high-risk" low-income borrowers.

New performance analysis of mortgages made to low-income buyers who participated in homeownership education programs offered by NeighborWorks America organizations show their foreclosure start rate is 20 times less severe than that of subprime borrowers, and three times better than that of prime borrowers. Comparing foreclosure data provided by the Mortgage Bankers Association, NeighborWorks found that while its own loan portfolio had a foreclosure start rate of 0.21% in the second quarter of 2008, the overall market's foreclosure start rate was 1.08%, more than five times as great.

Also, NeighborWorks mortgages perform similarly to prime market loans, NeighborWorks spokesperson Douglas Robinson said. Quoting Mortgage Bankers Association data, he said the foreclosure start rate for conventional conforming mortgages was 0.61% in the second quarter, compared to 0.21% for mortgages originated and serviced by NeighborWorks.

It is a well known fact that one of the toughest problems servicers face these days is to follow up the trail of data related to loans in default or risking foreclosure, Mr. Robinson said. Once loans move on to the secondary market it becomes even harder to properly evaluate loan default risk.

"It's hard to get answers about these foreclosed loans. I know from conversations with lender partners that fewer than 10% of the people who come to us for foreclosure prevention counseling received homeownership counseling," he said. "We look at this crisis and think how can we not have this happen again. One way is to somehow make pre-purchase mortgage advisory available to more people in the future and we will see less home foreclosures."

"Facts tell the real story," said NeighborWorks CEO Kenneth D. Wade. "The vast majority of mortgages ...