Homeowners Still Unaware of Opportunities

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Lack of awareness and education reign supreme topping the list of reasons why historic low mortgage rates, government-supported programs and large inventories of affordable foreclosures are not increasing refinancings and modifications. Given the complexity of the mortgage process homeowners are not taking full advantage of the wisdom gained during the foreclosure crisis.

“Many homeowners simply aren’t aware that there are better options available to them,” says Adrian Nazari, founder and CEO of Credit Sesame Inc., Sunnyvale, Calif., for example, they do not know solutions available “could potentially” help them save thousands of dollars on their mortgage in times when keeping the loan current is a challenge for many non-delinquent borrowers.

In his view American homeowners “may be missing out on substantial savings opportunities through a mortgage refinance.”

In the current marketplace knowledge is saving-power. The January 2012 Credit Sesame analysis of users’ credit profiles, income and home equity data shows “homeowners who would qualify for a refinance are overpaying an average of $471 per month on their mortgages,” he said.

If according to a Mortgage Brokers Association report 6 million homeowners pursued a refinance in 2011, Nazari argues, a closer look at their datasets shows that an additional 14 million homeowners qualify and could benefit from refinancing, but only 30% will pursue a refinance. It means seven in 10 qualified households are foregoing average savings of $56,520 over the course of 10 years.

Data also indicate more distressed customers who are looking for solutions online are catching up.

MortgageKeeper Referral Services of Downers Grove, Ill., a service designated to connect individuals in financial distress to local resources specialized in homeownership preservation assistance, finds financial knowledge is traveling slowly but surely.

According to data reported by MortgageKeeper at the Mortgage Bankers Association’s National Mortgage Servicing Conference in Orlando, Fla., homeowner daily requests for counseling referrals increased 25% from 2,300 to an average of 2,700 during the first six weeks of 2012.

The Homeowner Needs Status Report based on data from Jan. 1 to Feb. 15, 2012 shows homeowners received 118,235 referrals through MortgageKeeper’s network that lists American Home Mortgage Servicing, Ocwen Loan Servicing, First Guaranty Mortgage, Saxon Mortgage Services and the Homeownership Preservation Foundation among its participating members.

To put these data into perspective, the number of homeowners who sought assistance during the first month and a half this year equals 17% of all referrals received in 2011. The problems they face however remain the same in order of priority: Housing and credit counseling demand is followed by utility, employment and rental housing assistance.

MortgageKeeper Referral Services president Rochelle Nawrocki Gorey says data show “only part of the story.” As more and more consumers are accessing information, through servicer’s website, housing counselors, or customer-service agents, more banks are showing interest in this type of cooperation.

First Guaranty Mortgage Corp. of McLean, Va., a wholesale and retail lender that sees education as an effective strategy, joined the network in February. The partnership allows FGMC customer-service representatives to access over 6,000 nonprofit and government services 24/7 online.

Information is key to all homeowners regardless of whether they are looking for a loan modification or the refinancing.

Nazari’s directory of refinancing facts starts with the “general rule of thumb” that taking advantage of a lower mortgage rate should not be “the only reason to refinance a mortgage.” Distressed homeowners can lock in an interest rate that is 0.5% to 1% full point lower than the existing interest rate, even 2% when mortgage rates decrease. Refinancing might make sense if customers have improved credit scores that lead to a better rate and loan terms, refinance adjustable-rate mortgage loans to reduce loan default risk, or opt for shorter mortgage terms that help save money in the long run.

Finding the best deal, however, is another matter. It can be complicated and overwhelming. Steps that simplify the process, he says, include “crunching the numbers,” to determine what mortgage payment is affordable by factoring in income, savings and home equity. Knowing the credit score, comparing loan options and interest rates using mortgage loan comparison calculators also help in choosing the best deal.

“Considering the 14 million homeowners that are currently leaving $56,520 in savings on the table,” Nazari says, it is obvious financial education can help improve the finances of many unaware homeowners.