Combined with rising property taxes as municipalities attempted to close budget gaps, that has contributed to hardships for many families, and mortgage delinquencies rose sharply nationally in the second quarter.
Last week, the Mortgage Bankers Association of America independently reported an increased delinquency rate in the second quarter from the first. The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure.
Jay Brinkman, the mortgage bankers' chief economist, said the increase was "consistent with the slowdown in the economy during the first half of the year and our stubbornly high unemployment rate."
Agencies providing services complained that reduced government funding had shifted their priorities to "sustainability planning," the Philadelphia Fed report said.
Increased need for services has led many agencies to try to be "more efficient in our processes as well as reducing the depth of our services to our clients," the report said.
One recent boost to efforts to avert foreclosure in Pennsylvania has been resurrection of the Homeowners Emergency Mortgage Assistance Program.
Money to fund HEMAP, credited with saving 46,000 Pennsylvania homes since 1983, came from the state's share of the $25 billion national "robo-signing" foreclosure-processing settlement with five major lenders.
The program provides low-interest loans to borrowers who are at least three payments behind on their mortgages through circumstances beyond their control, such as unemployment or illness.
Patricia Hasson, president of Clarifi, a Philadelphia-based agency that counsels people facing foreclosure and provides financial-literacy education and similar services in this region, said the state program provided another means for borrowers "to learn about our services, so that even when they don't qualify for HEMAP, we can counsel them on other housing-modification programs."
Even so, Hasson said, "the uncertainty around government funding continues to be a challenge in how we reach and provide service to clients."
Clarifi is one of many agencies that have begun financial-literacy programs. During the housing boom, a lack of basic financial knowledge led many borrowers to take on mortgages that were more than they could afford, and for terms they could not understand.
One agency participating in the Philadelphia Fed survey said some low- and moderate-income families "go from crisis to crisis and do not plan for the future or see the importance of planning for the future."
Kimberly Henry, a housing counselor at Mount Airy USA, a Philadelphia community-development corporation who oversees a financial-education program for prospective home buyers and others, said people need to build up their savings, repair their credit, and develop household budgets and stick to them.
Yet few know anything about credit scores and how important they are, she said.
"They don't know that they should put at least 10 percent of their gross earnings into savings, or to pay off credit cards with the highest rates of interest first."
One agency told the Fed survey that many clients had low credit scores because of high debts owed on student loans, as well as costs associated with medical care for which they have no or inadequate insurance coverage.
For the agencies surveyed, the top three challenges have not changed from previous Fed surveys.
Seventy-seven percent of respondents cited lack of cash flow as the greatest barrier to financial well-being for low- and moderate-income households.
Seventy-five percent of the service providers chose underwriting standards and credit ratings, while 60 percent cited lack of financial knowledge as a major impediment.
Contact Alan J. Heavens at 215-854-2472, firstname.lastname@example.org or @alheavens at Twitter.