Learning from the Past to Avoid New Mistakes

Recently many conversations around me have been about learning from past housing mistakes, figuring out what lessons from the crisis to embrace. One simple word to wrap it all up is "learn." Start early and keep it up over the years.

In Pittsburgh, Dollar Bank recently celebrated the 10th annual "Mortgages for Mothers" workshop. The bank's VP for community development Mona Generett has seen the benefits of the program over the years. "There are no shortcuts when it comes to buying a home," she said.

"For the past 10 years we have been holding these free workshops to teach would-be borrowers the right way to reach homeownership. At our workshop we explain to potential borrowers the complexities of the mortgage process and help them design a plan to buy a house within their means." The workshop usually attracts over 300 female heads of households.

In April, the Department of Housing and Urban Development celebrated "Fair Housing Month" with a national education project intended for students from the fifth to eighth grades. Its aim is to give teachers, parents and their children a basic understanding of the Fair Housing Act. HUD's Office of Fair Housing and Equal Opportunity and its partners would visit schools across the country to instruct students about their fair housing rights. Bryan Greene, HUD's general deputy assistant secretary for FHEO, called it crucial that future generations of renters, homebuyers, landlords, Realtors and lenders know about the Fair Housing Act and know what to do when faced with housing discrimination.

Discrimination is just one potential risk that makes people interested in counseling.

According to Suzanne Boas, president of CCCS of Greater Atlanta, demand for our counseling services is rising significantly as people try to avoid foreclosure and bankruptcy, as well as cope with rising food and other costs.

In 2008, CCCS reported new housing counseling demand increased by a striking 184%. Over 30,000 Americans turned to CCCS for housing counseling in the first half of 2008 alone, nearly equaling the agency's total number of housing clients for all of 2007.

The increase in demand for assistance from the nonprofit resulted from a deepening national mortgage crisis "that initially affected mostly low-income borrowers, but is now spreading," CCCS said.

For the first time in the 44-year history of CCCS of Greater Atlanta, the average household income of clients seeking housing counseling exceeded $40,000.

In addition to a 184% jump in new housing counseling sessions, during that same period the agency said overall, counseling sessions conducted in person, by phone and over the Internet increased from 120,000 in the first half of 2007 to 170,641 in the same period this year, an increase of over 41%, bankruptcy counseling increased from 79,417 to 100,789 or 26.9%, and budget and debt counseling sessions increased from 29,544 to 38,837 or 31.5%.

Thanks to a $2 million grant made in 2008 by the Ford Foundation, CCCS could expand and respond to increasing demand. Expansion plans include the hiring of 80 new housing counselors, a new metro Atlanta counseling center and a pilot test of a new software platform that allows credit counselors eliminate lengthy delays faced by homeowners in urgent need of loan modifications.

CCCS data show that as expected most housing counseling sessions involve individuals seeking help to avoid foreclosure of their home. (CCCS provides counseling in all 50 states 24 hours a day, seven days a week, through a 24-hour hotline at 888-995-HOPE.)

The rise in people seeking bankruptcy counseling at CCCS agencies serving consumers in Georgia, Florida, Mississippi and Tennessee, the agency said, reflects the nationwide increase in the bankruptcy rate, and the fact that the federal bankruptcy law requires individuals to complete credit counseling before they can file for bankruptcy.

Also, there are those who are not under a foreclosure or bankruptcy threat and can take advantage of the current market.

Author and financial advisor Howard J. Ruff, re-edited and re-issued his 1978 bestseller, "How to Prosper During the Coming Bad Years in the 21st Century," where he talks about opportunities in the midst of the longest recession of modern history.

"When the government throws money at a problem, they eventually create monetary inflation," says Mr. Ruff, whose motto is: "Invest in inflation; it's the only thing that's going up."

Initially the recession causes deflation, which is why consumer prices are currently decreasing rapidly. "Store things now while they are still relatively cheap, then consume them later when everyone else is paying higher prices," he says. Plan how to profit from the coming inflation.

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