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CREDIT COUNSELING

Nonprofit Groups Take Center Stage

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By Renae Merle
Washington Post Staff Writer
Tuesday, December 4, 2007

In the middle of his speech yesterday on the administration's efforts to fix the mortgage crisis, Treasury Secretary Henry M. Paulson Jr. paused to carefully spell out a toll-free telephone number that troubled homeowners can call for help.

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The hotline is not staffed by government officials or mortgage lenders. Rather, the calls are answered by consumer counselors from nonprofit groups, which are taking an increasingly high-profile role in helping borrowers with mortgage problems.

The groups are acting in some cases as a buffer between lenders and homeowners. Legislation is pending before Congress that would tap NeighborWorks America, a national nonprofit group, to distribute $200 million to local counseling centers. In October, the Neighborhood Assistance Corporation of America, often a vocal critic of mortgage lenders, signed a deal with Countrywide Financial, the nation's biggest mortgage lender, to help restructure loans for struggling Countrywide clients.

However the administration addresses the mortgage crisis, "they are going to need the nonprofit community," said Kenneth D. Wade, chief executive of NeighborWorks.

His group is training new housing counselors and plans to double its counseling staff by next month. "We think every consumer needs a mortgage adviser," he said.

Nonprofit organizations around the country are already seeing a soaring demand for their services. St. Ambrose Housing Aid Center in Baltimore, which usually sees about 700 families a year, says it has met with almost 2,000 so far this year.

At the National Foundation for Credit Counseling, where about half the counselors at its member agencies focus on housing issues, President Susan Keating says: "We are very, very busy."

Government and mortgage industry officials don't often agree on what caused the mortgage crisis, what its impact will be, or how to cure it, but they all say that reaching homeowners before they go into foreclosure is difficult.

If a homeowner with an adjustable-rate mortgage that is about to reset, or one who is behind in payments receives mail from his lender offering help, the homeowner responds 3 to 5 percent of the time, according to Hope Now, a new alliance of mortgage industry and nonprofit organizations. If the offer comes from a community group, the response rate is about 25 percent. About 50 percent of homeowners who go into foreclosure do so without ever contacting their lender.

"If we are to make a difference, that number has to be reduced," Paulson said.

The best hope, many think, may be through the nonprofit community. The toll-free number Paulson touted -- 888-995-HOPE -- has seen a spike in volume, to 3,000 calls a day from 300 a year ago.

There are 180 consumer counselors from six nonprofit groups answering those calls. That will increase to 250 by the end of the year, according to the Homeownership Preservation Foundation, which manages the hotline.

With an estimated 2 million adjustable-rate mortgages scheduled to reset in the next two years, even that likely will not be enough. "We are definitely not going to be stopping at 250," said Tracy Morgan, a spokeswoman for the foundation, which is largely financed by the mortgage industry.

The counselors focus on diagnosing the homeowners' problems, then direct them to a local community group for help or guide them through a call with their lender. The initial call usually lasts about 45 minutes as the counselor puts together a detailed budget analysis and creates an action plan for the homeowner, according to the foundation. That could include getting a second job or reducing spending. The foundation does not charge homeowners for the service.

In a separate program, the Neighborhood Assistance Corporation of America acts as a go-between, working out deals with lenders on behalf of borrowers. Under its deal with Countrywide, the Neighborhood Assistance Corporation of America has restructured about 200 loans.

Like many nonprofit groups, it has seen demand for its services climb in the past year and attributes most of the increase to homeowners with adjustable-rate mortgages. To keep up with demand, the organization is opening five offices around the country and is hiring about 30 employees a month.

"This is just the beginning. It is going to get far worse," said Bruce Marks, the group's chief executive.


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