Counseling Agencies Swamped with Ramp Up

One dramatic effect of the Home Affordable Modification Program is that until recently servicers complained that most delinquent borrowers and homeowners did not contact their servicer - now, those who do are way too many to handle. A good problem to have, some say. If before borrowers were the ones who had more at stake, now the mortgage industry also has a lot at stake. It is as if for the first time servicers and borrowers became cohabitants of the same business world.

Silver Spring, Md.-based National Foundation for Credit Counseling reported that millions of customers are now seeking assistance from its member agencies, marking a dramatic increase in only a couple of years.

The agency reported that in 2006 NFCC member agencies assisted 1.48 million people and in 2008 the number more than doubled to 3.2 million consumers receiving counseling. As expected, at 244% compared to 2006, the highest increase in counseling in 2008 was related to housing. Second to the top at 110% higher was the number of bankruptcy sessions.

These services include budgeting, debt counseling for people in financial distress, housing counseling from prepurchase to foreclosure prevention, mandated bankruptcy prefiling counseling and predischarge education.

A snapshot of the demographics for the average person who contacted an NFCC member agency shows 27.4% are between the ages of 35 and 44, 48.6% white, 53.6% female and 49% married. Among various groups seeking assistance the largest growth was seen among Hispanics by over 100%.

NFCC says that when combining the data reflective of all services, "the top reason that consumers gave when asked what brought them to us was financial mismanagement." Respondents state economic reasons such as job loss and reduced income came second in their view of causes for their financial distress. According to NFCC spokesperson, Gail Cunningham, these findings are in line with NFCC's 2009 Financial Literacy Survey, which revealed that 41% of adults, equal to over 92 million people, gave themselves a grade of C, D or F when asked about their knowledge of personal finance.

"This strongly suggests that there is considerable room for improvement," the spokesperson says. "One of the most astounding statistics is that people who came to us had six credit cards with unsecured debt totaling 62% of their total household income. To put this into perspective, realize that this debt does not include their house or vehicle payment, but strictly represents credit card debt."

Moreover, NFCC says, the trend is continuing. Calls to its national locator line are up. Borrowers are both more weary and aware of their finances.

NFCC provides a financial literacy opinion section designed to evaluate its website users' opinion on various financial topics. According to NFCC, thousands of consumers have responded to a monthly question posted on the site. It provides "a glimpse into how Americans are handling the current economic conditions as it relates to their personal finances."

These survey findings show that indeed Americans are changing attitudes.

For example, the July 2009 question inquiring about "the one thing" that would make people feel more financially secure yielded 7,001 respondents, the largest number to date. And 5,110 of them, or 73%, stated they would feel more financially secure if they could reduce their debt load. In second place was the response "have more control over my finances" with 13%, followed by "have more money in savings" with 11%. Curiously, in times when job security seems the most important thing to most it ranked as the least of their concerns with only 4% or just 280 people selecting that category.

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