The Homeownership Preservation Foundation [HPF] was created, and is funded and run by the industry (see story here). It conveniently operates the Hope Hotline — the foreclosure hotline for troubled borrowers to call which has been promoted throughout the nation. [Do not confuse the HPF Hope Hotline with the Hope Now Alliance, more on the Alliance here.] Not surprisingly, because HPF is an industry front, the foreclosure hotline that they, the industry, media, and government promote may not be all that interested in helping borrowers, but merely to save the lenders money.
The hotline’s backers say the program’s function is to connect borrowers with their mortgage servicer — not work on behalf of the borrower. “We facilitate a conversation,” says Colleen Hernandez, executive director of the Homeownership Preservation Foundation. “We wouldn’t characterize ourselves as advocates where we are trying aggressively to convince the lender to do something.”
Wall Street Journal Article here.
Funny, they don’t mention that anywhere on their site here. Of course, Ms. Hernandez is telling the truth — they actually don’t appear to counsel anyone, but merely refer all their callers to other agencies. (More on that subject here, and here.) The real question is how were these other agencies selected? Do these agencies have a similar view that they should not try to convince the lender to do anything? Ms. Hernandez may be lying, and she secretly wants counselors to advocate for borrowers. Given that her board and her staff are the industry (here), that secret would be hard to keep, much less implement.
Furthermore, Ms. Hernandez, Executive Director of the Homeownership Preservation Foundation, explained in a memo what appears to be the real purpose of the Hope Hotline — to save lenders money (memo here). First, she explains what the hotline is and its stats, and then she explains the ”cost/benefit” of their activities:
- For every 100 calls, 47% turn into counseling sessions. Each counseling session costs $100. So the expense for those sessions is $4,700.
- For those 47 counseling sessions, 25% or 12 are recommended for work-out.
- For those 47 counseling sessions, 17% or 8 are recommended to sell.
- Both work-outs and sales help borrowers and lenders avoid foreclosures.
- 42% of counseling sessions have positive outcomes. That’s 20 out of the 47 sessions that avoid foreclosure.
- Industry tells us that each foreclosure costs a minimum of $30,000.
- $30,000 times the 20 households who avoided foreclosure is $600,000. For $4,700 industry saves $600,000.
Notice that she lumps work-outs and sales together to arrive at the 42% “positive outcome”. Let’s just assume that HPF’s definition of work-out is not the same as the Hope Now Alliance (which includes both repayment agreements that may be destined to fail, along with modifications, more on the Alliance’s flawed definitions here). The elephant in the room is her “positive outcome” stat because she includes sales — short sales, deeds-in-lieu, whatever, some sort of voluntary sale instead of a foreclosure sale. These may not be positive outcomes for borrowers, but they are clearly positive outcomes for lenders. The memo is great at explaining how much money HPF’s Hotline saves the industry. She even sums it all up for them:
On a daily basis [assuming the hotline gets 650 calls a day]:
650 calls x 47% conversion rate = 305 households counseled.
305 sessions x 42% success rate = 128 households daily who avoid foreclosure.
128 x $30,000 saves per foreclosure = $3,840,000 saved to industry daily.
Memo of Colleen Hernandez, President, Homeownership Preservation Foundation here.
What a fantastic hotline for the industry. I am sure this is an old memo because the hotline gets many more calls than this per day. At the end of 2007, it was getting on average 1,500 calls a day (source); thus, the hotline was saving the industry $7 million per day according to HPF’s methodology. It is truly something to be proud of. No wonder the industry started and funds HPF (more here).
Again, maybe Ms. Hernandez is lying, or spinning stats to encourage more lenders to give money to HPF. The memo appears to have been written for someone in the industry. However it is hard to give support to such a theory given that the industry controls HPF at the board and staff levels.
Why couldn’t an entity that is truly independent from industry operate a national foreclosure hotline? It appears the industry jumped in and got government backing early for this one so as to discourage that from happening. It worked. These guys are good.
Filed under: National Foreclosure News
[These guys are good.]
First of all, this is a very well-researched article. I’m not seeing this level of accuracy anywhere else… kudos.
The mortgage industry has done a phenomenal job of damage control, both on the PR front and on the legislative process.
It’s mind-blowing how hoodwinked the MSM is on these issues. They buy into every half-wit initiative, their “Tips on Avoiding Foreclosure” is a regurge lifted directly from HUD’s website, and they’ve demonized all third party companies, unless they’re non-profit [most paid by the mortgage industry].
What I find most interesting is that the HOPE NOW scam is saving the *servicers* money, but not necessarily the investors- loss severities are at an all-time high since the depression.