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Focus On Counseling Still On

Starting with the foreclosure crisis and particularly during 2009, specialized debt, credit and even small business management counseling efforts received heightened attention bound to further evolve during 2010.

Some of the country's largest banks are expanding their face-to-face counseling capacity. Others are simply expanded services and added new tools.

At yearend 2009 Chase added 24 mortgage-counseling centers and pledged to increase the number of such centers that provide face-to-face assistance to distressed homeowners in 14 states to a total of 51 by the end of March this year. According to the head of retail financial services at Chase, Charlie Scharf, the move responded to the unusually high demand for loan modifications and following the successful engagement of its initial 27 centers in providing a complete document packages looking for permanent payment relief. Located in major metro areas such as Cleveland, Dallas, Houston, Boca Raton and Ft. Lauderdale in Florida, and Seattle these centers enable borrowers to schedule appointments or walk in six days a week. Since they first opened at the beginning of 2009, Chase said it has provided counseling for over 60,000 borrowers.

Marix Servicing, LLC of Phoenix has developed the Hispanic Homeowner Outreach Program a unique component-servicing program designed to assist Hispanic homeowners increase the success the loan modification process.

To achieve that goal the specialty default servicer (formed by Marathon Asset Management, LP, a global investment management firm with $9 billion in capital), partnered with the National Financial Services Consortium, LLC, a minority owned businesses that provide contractual services and homeowner outreach.

The program is designed to assist mortgage servicers with advanced techniques to communicate with Hispanic homeowners who are behind on their mortgage payments by providing a supplemental process works in conjunction and alongside existing servicer loss mitigation efforts, Marix said.

According to Marix president Rick Smith Hispanic borrowers are one of the groups most disproportionately impacted by the current stress in the mortgage markets.

HHOP supports a servicer's existing process by connecting with at-risk borrowers who need special assistance with language, culture and understanding in order to bring them back on track with their primary servicer.

Prodigy Law Group, Inc., Irvine, California, provides consumers, families and small businesses professional help when dealing with legal issues brought about by a hostile economic environment, such as mortgage abuse counseling, commercial and consumer debt settlement, or bankruptcy counseling.

The firm's Mortgage Abuse Counseling Service assists predatory lenders victims. It is designed by attorneys to identify legal violations associated with the origination and servicing of any type of mortgage loan and to counsel homeowners on the best way to hold their lender accountable for those violations.

"We've found numerous instances of abusive and illegal activity, many of which justify legal action," said Gary Patton, head of the firm's predatory lending practice. "Predatory lenders often target minorities and the elderly. However, in many cases, our clients simply want an affordable mortgage so they can stay in their homes. That's why clients for this new service are granted free access to a user-friendly online software program that assists them in preparing and submitting a professional and complete loan modification request to their lender."

The firm's managing director Seth D. Heyman said the program was created to protect from predatory lenders unsuspecting borrowers who have received charged thousands of dollars illicit fees that have straddled with mortgages they cannot pay. So the firm provides its clients with free access to the online loan modification system as a courtesy, because many of them simply want to remain in their home. Nonprofit credit counseling agencies like the Consumer Credit Counseling Service of Greater Atlanta, which acts as a trustee in distributing the funds to creditors, is encouraging those struggling to both keep up with their mortgage payments and repay their credit card debt to set up a DMP or debt management plan. The immediate benefit for people with large balances and high interest rates is in the favorable repayment terms offered by a variety of creditors as a way to respond to the economic and foreclosure crisis.

If in 2008 consumers were assigned interest rates ranging from 10% to 14% when participating in a DMP, by yearend 2009 these rates dropped to 6% to 10%, according to CCCS, and may drop again this year creating new opportunity for customers, including homeowners, who opt for a DMP to repay unsecured debt prompted by late payments that cause credit card interest rate increases to 28% or more.

Rick Phillips, vice president of debt management plan services for CCCS of Greater Atlanta suggests a wider use of these tools as a long-term strategy to get debts under control using a counselor as an intermediary that works with clients and creditors to design a repayment plan that minimizes monthly payments, interest and related fees. The average debt management plan is structured to repay debt in 36-60 months. CCCS of Greater Atlanta data show that 65% of the agency's DMP clients either paid off their creditors or felt they had sufficient control of their debts to assume control themselves.

In 2009 Goldman Sachs pledged $500 Million in its "10,000 Small Businesses" initiative designed to address the effect of the rising unemployment rate on foreclosures by investing in small businesses - since they employ over 50% of U.S. workers but face higher survival risk.

Goldman Sachs's overall investment included $300 million in direct support to Community Development Financial Institutions, which will in turn offer both professional counseling and financial assistance to small business owners. The goal is to provide resources that can make a difference now and in the long-term.