Counseling Demand At Record Levels, but Fatigue Is Setting In

Statistics aside, the credit counseling industry can hardly keep up with demand.

The numbers look good, but according to the president and CEO of the National Foundation for Credit Counseling, Susan Keating, they do not tell the whole story. Numbers cannot measure what insiders call “the fatigue factor.”

In her 2010 state of the credit counseling and financial education sector address, Keating gave her peers and the wider mortgage industry a pat on the back and a warning.

NFCC member agencies served 4 million people in 2009 alone, which compared to 2008, marks a 22% increase. And that is good news albeit in a somber way.

“A shift has occurred and we are seeing a decline in client volumes to levels predating the financial meltdown,” she said. And that is bad news in times when the number of foreclosures continues to be very high. “There are still far too many people who need services for a variety of reasons but are not getting the help they need.”

Other industry insiders have been issuing the similar warnings. A lot has been done, more resources have been directed towards counseling but it is far from enough.

According to a spokesperson for the Homeownership Preservation Foundation, since economists estimate that close to four million more homeowners may face delinquency in the near future, going forward, all types of assistance are expected to be in high demand.

Since 2008 HPF has provided information and financial education to over 4 million distressed homeowners who dialed the Homeowner’s Hope Hotline asking for help on how to avoid foreclosure. The free hotline—that offers counseling services every day of the year for 24 hours in over 170 languages—received 1.3 million calls in 2008, another 1.77 million calls in 2009 and over 122,000 calls per month in 2010 that equals over 5,500 calls from homeowners each day.

In addition, online education provides basic essential information needed to build and maintain good credit, develop a budget, buy a home, and be prepared for the full costs of sustainable homeownership. In-house surveys of hotline users show that 86% of the homeowners who called were able to better understand their options after talking with a counselor.

During her speech Keating argued that despite nationwide efforts to alert borrowers and inform them about free counseling centers, “some don’t know help is available or are ashamed to ask for it.” Others are jaded or fearful “because of the shenanigans of some in the for-profit debt settlement industry,” or simply are tired of everything and give up—hence, “the fatigue factor.”

The business of solving financial problems has turned into a booming industry that includes creative life saving benefits and predatory activity. As both nonprofits and for-profit agencies target distressed borrowers, particularly advertising from for-profit companies that engage in debt settlement practices deliberately blurs distinctions between the two types of agencies to confuse borrowers, she said, through aggressive TV, radio, direct mail and online advertising.

“Six years ago Congress removed some ‘bad apples’ from the nonprofit credit counseling sector,” she recalled, “but new ‘bad apples’ have sprung up in the for-profit arena that have made consumers understandably gun-shy about reaching out for help.”

Government-private partnerships on the other hand, appear to be a solution well received by lenders and borrowers.

HPF partnered with the Department of the Treasury, Fannie Mae, Freddie Mac, private investors, Department of Housing and Urban Development and NeighborWorks America to build an efficient bridge between homeowners and their lender-servicers.

Data show such partnerships are having a positive impact on consumers.

HPF reports that even though as a rule distressed homeowners find it difficult to obtain information and assistance from their servicers, up to 50% of the HPF callers surveyed said they made direct contact with their servicer with the help of its hotline counselors. Another 34% said their servicer was more engaged in the workout process after borrowers had been counseled.

HPF founder and chairman of the board Bruce Paradis sees these data as “a strong indication” that distressed homeowners find it easier to contact independent, third-party, foreclosure prevention counselors.