Innovating Foreclosure Prevention Outreach: Meeting Homeowners Where They Are
The COVID-19 pandemic created one of the most daunting times for U.S. homeowners. With unemployment rates rising and mortgage defaults looming due to the pandemic, forbearance relief options were quickly developed in response. These efforts helped the vast majority of Freddie Mac borrowers who fell behind on their mortgage payments.
However, the impacts of COVID-19 have affected people at different stages throughout the pandemic. For example, those who lost jobs early in 2020 may have found new ones; some may have decided to exit or reduce their participation in the workforce to take care of family, while others impacted this year may still face challenges as the forbearance relief period nears an end. Ahead of the next widespread disaster—whether a pandemic or natural catastrophe—the need for foreclosure prevention education is crucial, as is creating new ways for mortgage industry professionals to get these resources into the hands of borrowers who need it most.
Moving forward, how can we better understand the needs of struggling homeowners, and where can we reach them with foreclosure prevention information during times of need?
Borrower Hesitation and the Vulnerability of Asking for Help
As the pandemic quickly demonstrated, it was often difficult for homeowners to find sources of information on forbearance relief options amid an evolving environment. While the industry quickly made options available and established awareness campaigns to help lenders and housing professionals assist struggling homeowners, some people didn’t seek help or guidance.
When strategizing solutions to expand the distribution of foreclosure prevention information, it is important to recognize why some homeowners may not reach out for help. Is this strictly a lack of awareness of existing solutions? Or are there other psychological and societal hesitations coming into play?
“Part of why we are reluctant to ask [for help] is we assume people are going to say no - it’s uncomfortable,” social psychologist Heidi Grant, associate director of the Motivation Science Center at Columbia University, said in a recent Washington Post report. “We feel vulnerable when we ask another person to help us. We worry about what they’ll think of us, whether they’ll think less of us. We worry about being a burden.”
Furthermore, minorities have been disproportionally affected by the pandemic. According to a 2021 report by the Consumer Financial Protection Bureau, Black and Hispanic families are more than twice as likely to report being behind on their housing payments than white families.
In addition to being negatively affected by pandemic-related financial hardship at higher rates, hesitation by minority communities to seek and accept assistance is often rooted in fear of discrimination, as well as a distrust in financial institutions stemming from past systemic racism. This can result in people avoiding asking for help. Reaching homeowners where they feel safe and more comfortable to discuss financial hardships can be key to determining the best course of action in providing relief.
The Solution: Meeting Borrowers Where They Are
Asking for help during a time of crisis can be a vulnerable position to be in, and regardless of why some homeowners are hesitating, the need for access to information is critical. Freddie Mac is exploring ways to engage more homeowners by identifying community organizations who may be trusted advisors, sources of comfort or provide other critical services addressing financial challenges. By meeting struggling homeowners in familiar settings outside of the mortgage and finance ecosystem, they can receive the information needed to understand their options to retain homeownership.
For example, one way is to provide foreclosure prevention resources through employment organizations. If a homeowner is working with a workforce development agency, it is likely that their income has been affected by the pandemic, potentially impacting their ability to pay their mortgage. The borrower has already taken the vulnerable step of reaching out for help; instead of them having to do so again with a financial institution, they can become aware of tools and resources there or be connected with a housing counseling agency. This would allow for essential awareness and subsequent conversations around foreclosure prevention options to begin as a first step to sustain homeownership.
Employment organizations are one example to reach homeowners where they are. By providing education materials through other non-housing specific organizations such as labor unions, libraries, retail establishments, food banks, faith-based organizations or community centers, there is an opportunity to expand foreclosure prevention education beyond the traditional outreach channels. Communities have their own networks within these affinity groups, and many have their own training and educational programs. Finding ways to partner with these organizations can:
- Improve financial capabilities programs.
- Provide credible guidance and resource materials.
- Enable in-need borrowers to get the necessary support.
The Resources: Customizable Toolkits and Assets
Customizable toolkits and foreclosure prevention resources developed as part of Freddie Mac’s #HelpStartsHere initiative provide useful information sources for our partners outside of the mortgage and finance ecosystem. The toolkits allow these partners to feature their organizations and contact information in outreach materials for community resonance and cascade it out within their community alongside Freddie Mac’s name to drive additional credibility. By packaging this information, the burden of aggregating information, creating materials and training is eliminated, while traditional and non-traditional community partners provide the connections and safe space for struggling homeowners.
This partnership may prove to be a missing piece of the puzzle. By creating a playbook applicable for future struggling homeowners, whether that be a part of a widespread disaster or stand-alone issue, we establish a solution of meeting homeowners during the early stages of hardship where they feel comfortable to ask for help.
The foreclosure prevention program resources are designed using a research-based approach to develop, implement, test and scale innovative solutions by the Housing Solutions team within the Freddie Mac Single-Family Client and Community Engagement division. This team aims to reduce barriers to homeownership with a focus on access to credit, homeownership and neighborhood preservation, revitalization and equity. The Housing Solutions team partners with non-profit, industry and non-traditional housing stakeholders across a variety of markets to create community-specific initiatives that will shape the future of housing.