New York State homeowner Mark Murphy struggled to pay his mortgage after losing his job in 2009. After several attempts to get mortgage help from his bank, the bank offered him a loan modification  in 2011. But while out-of-state job hunting, Murphy missed mailing a payment and the bank started to foreclose.
Fortunately, Murphy knew just who to call. During the trial period plan (the first step of a loan modification), he’d been paired with a credit coach at Homeownership Preservation Foundation (HPF), an independent national nonprofit based in Minneapolis. His coach jumped in to break up the log jam with the lender and offered “a lot of other helpful information” for long-term success with his finances, saving Murphy from foreclosure.
According to Jeff Mandel, CEO of iQual Corporation, a national consumer credit advisory company in Rancho Cucamonga, California, having a trusted advisor is as important to homeowners as the credit curriculum. “The goal is to provide resources and an advisor they can rely on so they don’t slip back into debt,” Mandel says.
Credit coaching covers the basics like budgeting, managing household finances, and paying bills to more complex topics like understanding credit reports and eliminating credit card debt. Courses can be one session or multiple sessions, held over the telephone or Internet or in person.
Credit coaching can benefit any homeowner but is particularly important for those recovering from a mortgage crisis, notes Mark Cole, Chief Operating Officer of CredAbility, a nonprofit credit counseling firm in Atlanta. “These homeowners may have lowered their mortgage payments but unless they modify spending habits they can run up their debt again,” says Cole.
The relationship between credit coaching and success with loan modifications (that keep homeowners in their homes) has the attention of mortgage investors like Fannie Mae. In a national program, Fannie Mae pays for credit coaching for homeowners starting their trial period. This ongoing program involves 17 of the nation’s largest mortgage servicers and has already benefitted more than 11,000 homeowners.
“Modifications relieve 30-40% of a homeowner’s financial stress,” explains Bob Kantor, a director in Fannie Mae’s Credit division. “Credit coaching takes these homeowners the rest of the way to being ready for long-term financial success,” says Kantor.
If your loan is owned by Fannie Mae  and you’ve accepted (or plan to accept) a trial modification offer, you may be contacted by a credit coach about this program, says Kantor. Otherwise, you can find a credit coach by contacting your mortgage company (the company on your monthly mortgage statement) to ask for recommendations, contacting a HUD-certified counseling agency , or calling the HOPE Hotline 888-995-HOPE (4673).
Move Forward…With Caution
Because there are a lot of companies offering to “fix” or “repair” credit, finding the right fit can be tricky. Experts advise watching out for these common red flags:
- Being asked to pay upfront.
- Having to sign a long-term contract—most agencies offer month-to-month arrangements.
- Agency is unknown/unaffiliated with HUD, local chambers of commerce or the Better Business Bureau.
- Not understanding the entire cost of a program.