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Cascade: No. 66, Fall 2007

Servicer-Funded Counseling: A Resource for Homeowners

Nonprofit credit and housing counseling, once a quiet niche area, is suddenly in the limelight as a valuable way to help homeowners who are delinquent on their mortgage payments.

One of the main sources of such counseling is a national hotline operated by the Homeownership Preservation Foundation (HPF) in Minneapolis, Minn., and funded largely by mortgage-servicing companies and lenders. Calls to the hotline (888-995-HOPE) are automatically routed to one of five agencies that have contracts with HPF to provide counseling.1

The five agencies employ 112 counselors who are fully dedicated to answering hotline calls, a substantial increase from January 1, 2007, when 65 counselors were employed for this purpose. The counselors have counseling certification from the Association for Financial Counseling and Planning Education or the National Foundation for Credit Counseling and have expertise in delinquency and default counseling, a relatively new area in a field known for pre-purchase counseling. The five are HUD-approved agencies.

Tracy Morgan, vice president for communications and business development at HPF, said: “The counselors’ focus is on the entire financial picture, not simply the mortgage. Our counselors want to find out what led to this situation and whether it’s temporary or permanent. They make recommendations on a homeowner’s budget, explore ways to increase income or decrease expenses, and then provide an action plan and budget to guide the homeowner’s next steps.”

The counselors are available for follow-up counseling as needed. Counselors often facilitate a three-way conversation with the borrower and servicer and may also refer homeowners to local agencies as appropriate. Morgan said that the duration of HPF-funded counseling depends on each situation and may range from one hour to nine months. A caller to the hotline will find a counselor available 24 hours a day, seven days a week, Morgan said.

HPF reports that 15,205 homeowners were counseled in the second quarter of 2007, more than double the number counseled in the first quarter of the year.

Homeowners appear to be calling the hotline earlier. Of homeowners who called the hotline in the second quarter, 21 percent were less than one month behind in mortgage payments, compared to 14 percent in the first quarter. Fifty percent of callers were more than two months behind on mortgage payments, compared to 62 percent of callers in the first quarter.

HPF statistics for the second quarter of 2007 also show:

  • Problems with fixed-rate mortgages were as likely as concerns with adjustable-rate mortgages;
  • The states with the highest number of homeowners receiving counseling were Ohio, California, and Georgia;
  • Forty-seven percent of callers reported annual household incomes of less than $36,000, while 11 percent of callers’ annual household incomes exceeded $72,000.

Of incoming calls, 26 percent were referred by lenders and servicers, 19 percent by professionals or friends, 19 percent by media coverage, and 7 percent by NeighborWorks affiliates.

A predecessor program of HPF started to provide foreclosure prevention counseling for GMAC Homecoming customers in 2002. HPF was launched with a $20 million grant in 2003 from GMAC RFC (now GMAC ResCap) following a pilot program in Chicago, that had positive results helping homeowners avoid foreclosure. Other major funders of HPF include Citicorp, Countrywide, Home Loan Services (a subsidiary of Merrill Lynch), HSBC, JPMorgan Chase and Company, Ocwen, Washington Mutual, Wilshire Credit Corporation, and Fannie Mae, Morgan said.

HPF pays the five agencies an undisclosed amount, including salary and administration costs, for each counseled homeowner, Morgan said.2

NeighborWorks – Ad Council Campaign

NeighborWorks America has worked with the Ad Council to develop a three-year media campaign to inform homeowners who are delinquent on their mortgages that assistance is available from the HPF hotline. The campaign, which is being unveiled around the country, is funded largely by servicers.

In addition, NeighborWorks has commissioned a study on the impact of counseling provided through the HPF hotline.

For information, contact Tracy Morgan at tmorgan@995hope.org; www.995hope.org. External Link To learn about the Ad Council campaign, go to www.foreclosurehelpandhope.org. External Link For information on NeighborWorks Center for Foreclosure Solutions, go to www.nw.org/network/home.asp. External Link

  • 1 The five are Auriton Solutions, based in Roseville, Minn.; Consumer Credit Counseling Service of Greater Atlanta; Consumer Credit Counseling Service of San Francisco; Novadebt, in Freehold, N.J.; and Springboard Nonprofit Consumer Credit Management, based in Riverside, Calif.
  • 2 HPF is also providing up to $1.2 million to assist the National Urban League in a foreclosure prevention and education program targeted to Houston, St. Louis, and Philadelphia.