OCTOBER 2004

Homeownership Counseling Gets a Boost

A private-sector initiative to boost homeownership counseling was announced in August by the Neighborhood Reinvestment Corporation (NRC). A 2001 Freddie Mac study found that high-quality education and counseling can reduce 90-day delinquencies on home mortgages by up to 34%, but it is been estimated that only 15% of first-time homebuyers receive such training. Consequently, the NRC has set up the Neighborworks Center for Homeownership Education and Counseling (NCHEC) to try to fill this gap.

The NCHEC's mission is to work with industry partners to establish and promote national quality standards, and provide expanded training and certification opportunities to counselors across the country. The new center's goal is to train and certify more than 2,000 counselors per year by 2006 (up from 700 to be trained this year). This should translate into the provision of education and counseling services to more than 2 million households by 2007, a nearly ten-fold increase from the 291,000 people counseled in 2003. According to NRC, the NCHEC will focus on households that "earn less and are more diverse than the overall homebuyer population." To the extent the NCHEC's target audience resembles borrowers who have benefits from other NRC programs, 94% will be first-time buyers, 90% will be low or moderate-income households, 67% will earn less than 80% of area median income and 52% will be ethnic/minority households.

The chairman of the NRC, Federal Reserve Board Governor Edward M. Gramlich, said in a press release, "By training counselors and educators to a high standard, the Neighborworks Center for Homeownership Education and Counseling will provide a strong foundation of support for families who are buying and maintaining a home." Homeownership is a critical factor in building wealth for lower income borrowers. The Harvard University Joint Center for Housing Studies has found that the median net worth of lower-income homeowners is more than 13 times that of a similar renter. Nearly 70% of the total net worth of these homeowners comes from home equity. According to an NRC fact sheet, the typical family helped into homeownership by the programs of the Neighborworks network will likely accumulated more than $43,000 in home equity in one decade of ownership.