Counselors can aid those facing foreclosure

By
Mortgage and Lending with Cherry Creek Mortgage
Homeowners who fall behind on their house payments are told to do one of two things to avoid foreclosure: Call the lender or contact a nonprofit counseling agency. The second option often is better.

Some customers have reported wait times of almost three hours when they call their mortgage companies. By contrast, nonprofit agencies say they waste less of their clients' time because they don't put borrowers on hold as long, minimize phone tag, keep records about their conversations with clients, and don't ask for a bunch of paperwork in one call and a bunch more in a later call.

Hundreds of nonprofit agencies offer housing counseling. One of them is Cleveland's East Side Organizing Project, or ESOP. When homeowners turn to ESOP, it's usually after they have gotten nowhere with their mortgage companies, says James Jones, ESOP's director of intake.

"They have tried to be proactive and be in contact and straight with the lender. In many cases, they get bounced around," Jones says.

Here's what sometimes happens: When borrowers get through to someone at the mortgage servicer's loss-mitigation department, they are given a list of information to gather and told to fax it in.

"They're given a number to call back, and they call that number back and they get somebody entirely different," Jones says. The first person at the mortgage company might have asked for tax forms and pay stubs; the second person might ask for bank statements.

Jones says: "The homeowner is being bounced around, and of course the impression is that they're trying to take my house away from me. These are examples of the frustration homeowners go through when they're trying to be proactive."

No boom in training
Mortgage servicers complain that around half of foreclosures proceed without the borrower contacting the lender. But that statistic is suspect to anyone who has called a mortgage servicer for the second day in a row, only to find that the company has no record of the previous day's call or of the documents that were faxed. A rapid increase in delinquencies has outpaced mortgage companies' ability to hire and train employees to deal with the problem, resulting in poor customer tracking, long wait times and inconsistent service.

"The servicing business was not prepared for what happened in the last 18 months," says Doug Robinson, spokesman for NeighborWorks, a government-sponsored nonprofit that, among other things, indirectly pays housing counselors. This fiscal year, NeighborWorks will distribute $180 million in taxpayer money to state and local housing agencies to train and pay the salaries of foreclosure prevention counselors.

The NeighborWorks funding comes out to about $325 to $375 per family that receives counseling. People in the industry don't describe that as a government bailout of mortgage servicers, but it's hard to escape the conclusion that it is. Every time the government shells out $350 to counsel a family facing foreclosure, that's $350 that the mortgage company didn't have to pay its own employees to talk with that customer.

Mortgage servicers, government officials and nonprofits have embarked on publicity campaigns in recent months to tell homeowners that foreclosure-prevention help is available. The Hope Now Alliance -- a coalition of mortgage servicers, the federal Treasury and Housing departments, and nonprofit counseling agencies -- has mailed a million letters to troubled homeowners in four batches since November. In February, Hope Now announced Project Lifeline, which was pitched as a way to "pause" foreclosures -- but only if delinquent borrowers call within 10 days of receiving their notification letters.
Letters from Hope Now and Project Lifeline urge delinquent borrowers to call either their servicers or Hope Now's hot line: (888) 995-HOPE (4673). Callers to the Hope Now hot line are referred to nonprofit agencies.

How counselors help
Counselors have access to supervisors who can make decisions on proposed repayment plans or mortgage modifications. In effect, the nonprofit counselors do the same job as the phone answerers in the mortgage companies' loss-mitigation departments: They collect the necessary information, evaluate it and propose a workout plan to a supervisor. (See "What you need to get foreclosure help" to know what documents you need.)

A workout might entail forbearance, in which the borrower repays the past-due amount by paying extra every month for a year or two, or it might be a modification, in which the terms of the loan contract are changed. A mortgage might be modified by freezing or lowering the interest rate, by extending the final payoff date, or even by forgiving a portion of the debt.

"Everybody gets individual treatment," says Jessica Cecere, director the Consumer Credit Counseling Service of West Palm Beach, Fla. "The plans, the solutions -- everyone doesn't wear a size 8, so we're going to pull out all the stops to figure out what shoe fits."

The process requires a lot of personal financial information.

"What we're trying to do is understand what it is they can afford, given their current situation," says Thomas A. Kelly, spokesman for JP Morgan Chase. "We don't want to modify their loan or work out some agreement that they can't afford."

The same philosophy prevails at ESOP, where Jones says, "We don't build sky castles for them." Sometimes people can no longer afford their houses because the adjustable rate went up sharply, or because of job loss, illness, divorce or other misfortune. In such cases, "our suggestion is to seek some other means of having a residence," Jones says.

The hot spot
ESOP and about 15 other agencies use the Hot Spot Card, an information-gathering form developed by Chicago's National Training and Information Center. In addition to asking the questions you would expect -- the loan number, how far behind the borrower is on payments and how much house payment the borrower could afford every month -- the Hot Spot Card asks about lender malfeasance: Has the collections department called too early in the morning or too late at night? Has it refused to accept a payment?

Four servicers -- Chase, CitiMortgage, Ocwen and SPS -- have formal partnerships with NTIC affiliates to accept Hot Spot Cards, says Gail Parson, director of NTIC's Save the American Dream campaign.

"Because it has gone well with the group that we're working with, many times counselors will send Hot Spot Cards to other lenders," she says. It's an example of nonprofit agencies not only doing the jobs of mortgage servicers' front-line people, but of suggesting more efficient ways of doing those jobs.

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