Framework's CEO on education's role in homeownership during a crisis
Consumer advocates served as intermediaries between mortgage companies and borrowers during the Great Recession, and Framework Homeownership CEO Danielle Samalin sees them playing a similar role in the current downturn, too.
Founded in 2012, Framework Homeownership is a Boston-based consumer education provider founded by two HUD-approved nonprofit counseling intermediaries. It provides an online course that meets Department of Housing and Urban Development standards and fulfills education requirements for certain government-sponsored enterprise loans.
Samalin talked to NMN recently about the takeaways from the past recession that are helpful for companies trying to help borrowers and homebuyers with coronavirus-related challenges.
Below is a discussion with Samalin about those challenges and the role technology is playing to address them. Her responses are excerpted and edited for length.
What role did you have during the 2007-2008 housing crisis and how does it compare to the role you have now in helping homeowners and buyers contend with the coronavirus?
Between 2007 and 2012, I was at the Housing Partnership Network, supporting organizations created to respond to the foreclosure crisis. That crisis was a tsunami, and the organizations I supported had to ramp up fast to provide services and interface with the mortgage industry in new ways. They also had to access funding sources to do this, and a big part of my role was supporting these organizations’ access to federal funds made available in response to the crisis.
Framework, where I am CEO today, emerged out of this crisis. It was a way to reach consumers, at scale, using technology. Also, as a social enterprise founded by two nonprofit organizations, we wanted to be able to respond nimbly, without a reliance on precarious federal funds. The major difference between my work then and now is that Framework reaches consumers directly, while in 2007, I worked with organizations. However, Framework is connected to a network of nearly 200 organizations, so we still leverage that model. It's the only way to have the most effective impact on diverse markets affected by the current crisis. None of us can do this alone.
Prior to the Great Recession, counseling was primarily focused on the prepurchase education. Afterward, it became more focused on helping consumers struggling to make payments. How likely is it that counseling could have a similar role to play in helping the mortgage and housing markets recover from the coronavirus outbreak?
The Urban Institute found in the last crisis, that borrowers with counseling were 67% more likely to be current after nine months than homeowners without counseling, and nobody wants a deluge of foreclosures. But things are different this time around. This is a public health crisis unlike anything seen in our lifetime, and it is different from the 2008 crash, which was caused by predatory lending practices. I have been pleased with how quickly the mortgage finance industry has responded to the housing implications of coronavirus, and to the continued willingness to modify the approach if the response suggests they should. Without a doubt, housing counseling organizations will be called upon again to address this new crisis. It will be critical to quickly absorb lessons learned from last time, and apply them to these new challenges.
One of the challenges during the 2007-2008 crisis and its aftermath was establishing connections and collaborations between mortgage servicers and borrower advocacy groups. There's a sense that’s less of a concern this time around, but a dormant technology platform created to facilitate those kinds of connections was recently revived to address the coronavirus. Could these types of collaborations play a role in recovery again?
It concerns me very much that we will be unable to learn the lessons from the 2008 crisis. We absolutely need to revive the notion of efficiently sharing documents between housing counselors and servicers. We absolutely must remember that having a trusted advisor — an unbiased housing counselor, for example — made it more likely that an at-risk borrower would respond. This is something quite relevant right now, as there already is misinformation out there regarding who is/isn't eligible for things like forbearance. Collaborations are as critical as they were last time.
Last time, the nonprofit housing counseling industry had to fight first to make their voices heard, and then for critical technology efficiencies to be added to the loss mitigation process. We had to fight again for reimbursement commensurate with the value housing counselors brought to the transaction, such as a fee for service. I hope the industry remembers the lessons learned, so if a tsunami of foreclosures happens again, we are ready to address it from day 1.
The coronavirus and related policies have also created challenges when it comes to the home purchase process. What do you think the upshot of that will be?
There's a lot we’ll still need to learn about buying a house when COVID is a risk. In general, I see that people are still buying homes. Again, it's an opportunity to underscore how important technology is to the mortgage industry. Of course, if credit tightens as a result of this crisis, what we may see is that the space between the haves and the have-nots will widen. There were cracks in the system before the crisis; something like this only exposes them further.
How does your company educate consumers about the home purchase process?
Framework's products educate and support homebuyers and homeowners. Through our Keep Home platform, we provide tools and resources that guide homebuyers through every step and decision in home buying. This year, we have launched our homeownership features on the KeepHome.com web and mobile platform. We believe in homeownership and we know that the American dream isn’t achieved when a mortgage document is signed. It's about succeeding as homeowners.
So now we are rolling out features to support decisions we make as homeowners — from maintenance and repair or renovations, to financial insights. This includes the support we provide for homeowners in the event that they cannot manage their payments. The coronavirus has only strengthened the need for this support. We connect with networks of nonprofit counseling organizations around the country to make sure that if we cannot support our customers, we can send them to the best unbiased resources who can.