Joy and Andrew Giordano thought they could save their Baltimore home from foreclosure without any help. But in the end, they couldn't.
To avoid foreclosure, the Giordanos applied twice to their lender for refinancing under the government's Making Home Affordable program. Twice, they were turned down.
"We were not getting the right information from our bank," says Joy, who had to close her advertising specialties business because of the economic downturn. "We did everything we were told to do. But each time, we were not approved because of this or not approved because of that."
A friend suggested they speak to a housing counselor, but they were hesitant. On top of being embarrassed over their plight, the Giordanos didn't like the idea of pouring out their hearts to a total stranger.
"We thought we were doing a pretty good job on our own ratcheting things back," Joy recalls. "But through no fault of our own, we were on the verge of losing our house."
They called the counselor their friend recommended. But even that didn't help. They talked to the counselor several times, but she was too "overwhelmed" trying to help so many people in the same situation to offer much guidance.
Finally, out of desperation, the Giordanos gave counseling one last shot. This time, it worked.
The second counselor was "absolutely wonderful," says Joy, whose husband, a retired police officer, lost his job as an older-adult fitness specialist when a grant ran out at the college where he was working.
"We were pulling out money from our pensions and investments to make our house payments, and we got to the point where we realized we could not only lose our house, we could lose everything. But (the second counselor) worked with us and helped us put the package together into a format the underwriters could understand. And we got approved," Joy says.
Study after study has found that the Giordanos are not alone. For any number of reasons, people are way too timid when it comes to housing counseling.
Some view their situations as hopeless, while others think they can resolve their problems without any outside help. Still others are reticent to divulge their financial messes, are worn down by unresponsive lenders or have been burned by unscrupulous businesses that charge high fees but deliver no service.
Some even believe they cannot afford to ask for
But research shows that counseling works if you embrace it. According to one Department of Housing and Urban Development study, nearly seven out of 10 families were able to retain their homes with the help of a HUD-certified counselor. More than half cured their defaults and became current on their loans.
Want more proof? A Federal Reserve study found that counseled borrowers were more likely to obtain a loan modification and with better terms than uncounseled borrowers. And the Harvard Joint Center for Housing Studies reports that counseled owners were more likely to remain current once a modification was won.
Still, seeking help from a government-approved counseling agency is a big step. So, to help you understand the process and ease your fears, here is what you can expect.
-- Beforehand: You can help the dialogue with the counselor by having the following information at your fingertips: your monthly income and expenses, a list of debts and assets, the name of your mortgage servicer, the date the loan was issued, your payment amount, the interest rate and balance due, and the day and name of your last contact with the servicer or the company collecting your payments.
-- Contact: The phone call will last about an hour and will begin with a privacy disclosure. Once you understand your rights, the counselor will collect the above information and take the time to answer any questions or concerns you have. You will be asked to discuss your "hardship," or the reason you are having difficulty making your payments.
-- Choices: Based on a review of the information you provide, the counselor will explain all the options available to you. These might include a loan modification, in which your lender agrees to any number of changes, including principal reduction. Or they might include ways to dispose of your property and ease you out of your tenuous situation.
The discussion also could cover nonprofit resources and services of which you may not have been aware.
-- Action plan: The counselor will work with you to create an action plan to be used in preparing a recommendation to your lender.
You can take it from here, or your counselor can call the lender on your behalf to go over his or her recommendation and determine whether the lender is willing to help. If the counselor calls, you can listen in on the line or not. It's your choice.
-- Pay dirt: If the lender agrees, or if you and the lender find another alternative to save your house, you, with the help of a counselor, have succeeded where you alone might otherwise have failed. If the lender cannot help for some reason, you will be told what to expect and perhaps offered post-foreclosure counseling or even a cash stipend to ease your transition out of the house and into another dwelling.
All this is free. No charge. Gratis. If you happen to reach someone who asks for money upfront, hang up and go elsewhere.
You can find a list of HUD-certified counselors at the HUD website (www.hud.gov) and at www.nfcc.org, the National Foundation for Credit Counseling.