For Debi and Randy Sett, the dream of homeownership in the family-oriented but increasingly pricey DuPage County to the west of Chicago was becoming more elusive each week.
“We’re a single-income family with two kids, and when we started home shopping two years ago, we tried every bank and loan program that was out there,” recalls Debi Sett, 29. “We could not afford anything and all we were looking for was a simple three-bedroom house.”
Then, a relative who worked for a bank told the Setts about a home buying program run through the DuPage Homeownership Center, a housing counseling agency in Wheaton.
The DuPage Homestead Program subsidizes homeownership for people such as the Setts by providing a zero percent interest rate for 40 percent of the mortgage. The rest of the mortgage is financed at conventional market rates. A down payment grant is also provided.
“After hearing about the program, we realized homeownership was a possibility for us,” says Sett.
After helping the couple clear up a small credit blemish — an erroneous missed rent payment from nearly a decade ago — the agency was able to help the Setts secure one of the Homestead mortgages. About a year ago, the couple and their children moved into a three-bedroom split level in Lombard.
“The program opened doors for us,” says Debi Sett.
While the typical view is that housing counseling agencies help homeowners who are facing financial problems hang on to their houses, more of these agencies are also helping people such as the Setts become homeowners.
“I think the stereotype of a housing counseling agency is that it’s a place that you go to when you’re a homeowner in trouble,” says Dru Bergman, executive director of the DuPage Homeownership Center.
“More people are realizing that most housing counseling agencies are an educational effort instead,” she said.
For example, at the DuPage Homeownership Center, prepurchase counseling accounts for about 75 percent of the agency’s work, while default counseling accounts for the remaining 25 percent.
Prepurchase counseling takes many forms. There are workshops that educate potential homeowners to the work involved in buying and maintaining a home. “Through such education, people find out if it’s right for them to buy a home,” says Bergman.
“We try to show people what home owning is going to be like,” says Kate Williams, president of the Consumer Credit Counseling Service of Greater Chicago, another housing counseling agency.
“Do they know, for example, that they may be faced with fixing a hot water heater, or unclogging a drain or repairing gutters? And do they know about the costs of those repairs? To emphasize what we’re talking about, we’ll show them a real bill from a plumber for a basic repair,” she adds. “That’s a real eye-opener.”
Then there are financial programs such as the Homestead Program, which offer assistance to buyers struggling to get into a home. There are also programs that work with market rate loans. Here, the agencies educate potential homeowners to the savings found with adjustable rate mortgages versus fixed rate mortgages.
Default counseling, meanwhile, is as “varied as the individuals that come to our door,” says Bergman. For example, there are those homeowners who have fallen behind in their house payments because of a loss of a job, a divorce or a death.
“We also see a certain amount of families who probably shouldn’t have entered homeownership at this time of their lives,” she says. “They usually go into foreclosure within 18 months after buying their home.”
With default counseling programs, agencies will work as a mediator with a lender, setting up payment plans that allow a homeowner to catch up with missing mortgage payments. “We are often able to get the lender to back off if there is hope for the homeowner on the horizon,” says Williams. “Typically, we will work out a forbearance agreement between the homeowner and lender, in which the lender allows the homeowner to make lower payments or no payments for several months.”
Budget management counseling is also usually provided so that the homeowner can avoid future defaults. An interesting side note, says Bergman, is that her agency has yet to find a family in default counseling that had experienced prepurchase education.
To help a homeowner get into a house or hang on to a home, housing counselors work with both private and public agencies, such as local lenders; FannieMae, a privately-owned corporation that buys and sells mortgages; and government agencies such as the U.S. Department of Housing and Urban Development (HUD).
The agencies may charge consumers fees for select services, but they also receive funding from a variety of other sources — from government agencies such as HUD to private funding.
There are a number of ways of locating counseling agencies.
“People find us through a wide variety of sources,” says Bergman. “We get referrals from lenders, Realtors, social service agencies and churches, and we also have a lot of people call us as a result of articles and word of mouth.”
In addition, the Department of Housing and Urban Development runs a Housing Counseling Clearinghouse (1-800-217-6970), which lists HUD-approved housing counseling agencies across the country. For those computer users with access to the Internet, the clearinghouse operates a Web Site (http://www.aspensys.com/hcc/) where you can download lists of approved counseling agencies for each state.
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Jim DeBoth is president of Mortgage Market Information Services. Address your questions to Mortgages, c/o the Chicago Tribune, Real Estate Section, 435 N. Michigan Ave., Chicago, Ill., 60611. Sorry, we cannot accept questions over the phone and will not give personal replies.
