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Editorial: Counseling Comes of Age

Credit counseling used to be primarily a concern for loan originators. Counseling programs focused on making sure that first-timers were prepared for the financial responsibilities of homeownership.

Now, counseling is coming of age on the mortgage servicing side of the business. The surge in defaults, particularly among subprime credit quality homeowners, has sent lenders back to the drawing board to find innovative ways to improve home retention. And increasingly, lenders are teaming up with nonprofit credit counseling agencies that can offer borrowers a trusted source of advice not only about their mortgage problems, but also about their entire financial situation.

Servicers themselves - in particular industry giants Bank of America, Countrywide and Wells Fargo - have helped to lead the way through their participation in alliances such as Hope Now and through their relationships with counseling agencies. The Consumer Credit Counseling Service of Greater Atlanta has developed a national reputation for its work with lenders.

The CCCS of Greater Atlanta recently provided MSN with a profile of its client base, and the numbers show that many middle-class homeowners have fallen into deep financial trouble. Among the CCCS foreclosure-counseling clients, the median household annual income was about $40,000. On average, they had monthly living expenses of $1,796 and monthly debt payments of $2,379. That left those clients with a monthly deficit of $1,125. Their debt, on average, consisted of $1,693 in monthly mortgage payments, and an additional $277 per month in other secured debt payments (probably car loans, in most cases). Unsecured debt - such as credit cards - averaged $16,361, with a minimum monthly payment of $409. These clients had an average net worth of $23,569. The average FICO score for foreclosure counseling clients of the agency was 518. The numbers show that these borrowers don't have much wiggle room to manage financial problems. The expertise of agencies like CCCS of Greater Atlanta can help servicers find workout options or repayment plans that will help some of them retain their homes. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/

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