Counseling Helps Cash Flow

As more and more lenders begin working with credit counseling agencies to improve contact rates with delinquent borrowers, they are finding that counselors provide more than just a way to get borrowers talking about solutions to their home loan problems.

Mike Radesky, a consumer loan risk operations executive at Bank of America, said one of the key benefits of the relationship with credit counseling organizations is that it can improve contact ratios with delinquent borrowers. Bank of America is one of the early adaptors working on an initiative to put loan workout software in the hands of credit counselors, so that they can begin the process of negotiating a repayment or loan modification.

"The technology is good and we are using it where we can, but we have to get in touch with the customer for the technology to work," Mr. Radesky said.

But another advantage counseling agencies bring to the equation is that they can negotiate with a borrower's other creditors, and are often successful at negotiating reductions in unsecured, revolving credit card debt. That can improve cash flow and pave the way for a successful mortgage workout strategy.

It's an approach rarely taken in the secured credit world of mortgage lending, however. But Mr. Radesky thinks the industry may have to think about taking a haircut on mortgage loans as well in order to keep people in their homes.

"Maybe, even as a secured lender, it's to my advantage to take a discount," Mr. Radesky told National Mortgage News.

"If we can start to get folks to think that way, counseling agencies are going to be more successful and folks are going to be more likely to go to them," Mr. Radesky said.

Suzanne Boas, president of Consumer Credit Counseling Service of Greater Atlanta, said troubled borrowers are often reluctant to talk directly to their mortgage lender about financial hardship. "A lot of them think that if they are in contact with their servicer, if they admit that they have problems, it will cause the servicer to speed up the foreclosure," Ms. Boas said. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/

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