Remarks at United Way Financial Stability Leadership Summit, Chicago, ILjueves, 05 de junio de 2008
Thank you, Traci, for your kind introduction. It’s an honor to be here today.
Before I discuss our view of the current mortgage crisis, I’d like to introduce you to the work of the organization I oversee through the voice of one of our clients facing foreclosure. While we read almost daily about the rising number of foreclosures in every corner of our country, not many of us get much closer to the problem than that.
Today, our agency will hear from approximately 100 financially distressed callers facing foreclosure. Like the client you just heard, many of them will have fallen behind on their mortgage payments, aren’t quite sure where to turn, but need immediate help.
These are hard working people who are trying to keep their families together and a roof over their heads. What I want to talk to you about today is how our agency is working to help them, as well as some actions you can take in your communities.
First, let me provide you with some background about my organization.
Consumer Credit Counseling Service of Greater Atlanta is a 501c3 nonprofit agency dedicated to helping individuals and families achieve financial stability. We are based in Atlanta, though through recent mergers with other nonprofit agencies, we also have offices in south Florida, east Tennessee and central Mississippi.
For its first 40 years, the agency’s focus was largely on helping people get out from under excessive credit card and other unsecured debt.
However, over the past three years, we have seen a dramatic shift in the services we provide and the client base. We have become a nationwide provider of counseling services with an emphasis on foreclosure prevention and bankruptcy counseling and education, and we now provide counseling for people in all 50 states.
In 2007, we provided counseling and educational services to more than 400,000 Americans. This year, due largely to foreclosure prevention counseling, that figure will jump 50% to 600,000 people.
Our client base continues to be individuals and families from low- to moderate-income households - though we are also seeing an increasing number of people that fall into the middle class.
Our typical client is a woman in her early 40s with a gross household income just under $40,000, with three dependents and with approximately $20,000 in unsecured debt. Approximately 40-45% are racial minorities and 75% are considered low-income by HUD standards.
As you would guess, the average mortgage payment for these clients has jumped significantly in a very short time.
In 2006, the average mortgage payment for someone trying to avoid foreclosure and seeking counseling was $1,110.
Unfortunately, the average mortgage payment jumped to nearly $1,700 per month last month. After living expenses are deducted, the typical homeowner has more than $1,000 in expenses than their income can cover.
We have seen a significant rise in the number of housing counseling sessions over the past couple of years. For example, in 2006, we conducted just more than 9,000 housing counseling sessions nationwide.
That number quadrupled last year, rising to approximately 31,000. However, in 2008, we project that our counselors could conduct counseling sessions for as many as 100,000 people.
We do believe that counseling has a major impact on whether people can keep their homes and avoid foreclosure. Our research shows that 75% of homeowners who call our agency within three months after becoming delinquent on their mortgage have avoided foreclosure.
As concerns about the impact of the mortgage crisis have unfolded, many of us have attended meetings in Washington over the past several months. We know that finding solutions for homeowners and the mortgage industry is a high priority for Treasury Secretary Henry Paulson and other top federal government officials.
One of those solutions which has been recognized by the Treasury Department is the HOPE hotline sponsored by the Homeownership Preservation Foundation – 888.995.HOPE – which has been a lifeline for many homeowners nationwide.
Our agency is one of 10 nonprofit counseling agencies in the nation that answer the HOPE hotline calls. In all of 2007, we received about 65,000 telephone calls from the HOPE hotline. However, in just the first three months of 2008, we received 50,000 calls.
Many people who call the HOPE hotline are simply looking for advice on how to stay out of trouble, while others are already behind on their mortgage payments and are seeking help to ask for a workout.
Briefly, here is what happens when people call the HOPE hotline.
Once a homeowner calls and schedules a counseling appointment, we help them determine if they may qualify for a loan workout.
Our counselors find out why a person has fallen behind on their mortgage payment. Then they discuss every single monthly expense they incur and make recommendations on how the homeowner can cut expenses and save money. After the session, we determine if a homeowner has the financial ability to make future payments. If so, we send their information to their mortgage servicing company in the hopes a workout loan will be offered.
In each and every case, a housing counseling session is free and confidential. This is true for any counseling session from any nonprofit organization in the U.S. that is part of the HOPE hotline network.
This is where we are today. But what does the future hold, especially for so many people in need? Maybe most important, what actions can United Way organizations initiate to help homeowners in your communities get through this nightmare?
For starters, we believe the high number of foreclosures nationally is likely to continue for the foreseeable future, though the depth of the problem depends on each region. There are many reasons for this concern, such as soft consumer and business spending, a weak job market and rising prices for food and gas.
We all know of problems in or near our own communities, so let me share one with you. Clayton County, Georgia, is a suburban county south of Atlanta with just under 300,000 residents. In the month of May, one of every 10 mortgages was at least 60 days past due.
We know that foreclosures are prevalent in states such as Michigan and Ohio, where job creation has been low, or states such as Florida and California. But Clayton County is in a state and a metropolitan area with an unemployment rate lower than 5%.
Each of you likely has a county or large section of the community that is suffering very much like Clayton County. There are actions you can take to make a difference, but the solutions may be different, simply because this mortgage crisis is not just a local issue.
I have to assume that many of you have been searching locally for the nonprofits and other organizations that can provide some help. If you have found one, you are very fortunate. If you haven’t, I have another possible solution.
I would encourage you to develop partnerships with national organizations that have the resources to help people. There are some good, well-managed national nonprofit organizations dedicated to solving the current crisis and they have the resources to help.
A good example is finding a way to form a partnership with Neighborworks America, a national organization based in Washington that is focused solely on the foreclosure prevention issue.
Neighborworks America has already designed flyers promoting the HOPE hotline, and those flyers can be downloaded right from their web site. You can begin a local outreach campaign almost immediately through the use of their flyers.
In addition, the organization has produced public service announcements and advertising by the National Advertising Council that can be published or aired by your local media.
If you can get these materials into the hands local media that you already work with, you can begin to help people in your communities.
Those are some easy solutions. If you want to expand your efforts, there are also ways to involve your local officials, and this is where your ties to the local leadership are so valuable.
In late 2006, we began working with several government officials and organizations as part of a broad campaign to publicize the HOPE hotline. We established partnerships with leaders of the target communities, including Atlanta Mayor Shirley Franklin and her cabinet, as well as the city council president and the heads of two county commissions.
By establishing these relationships, we leveraged distribution channels such as city water bills and secured the use of the City of Atlanta and DeKalb County logos on campaign materials. Several of these officials also made important media appearances for the campaign.
We also negotiated partnerships with the two leading radio station groups for African American audiences in Atlanta---CBS Radio and Radio One. These partnerships included a mix of paid advertising and public service messages recorded by Steve Harvey and Al Sharpton.
Finally, in December 2007, Neighborworks America announced its new series of public service ads - these are the ads I mentioned a few minutes ago. The ads are aimed at getting financially distressed homeowners to reach out for assistance as soon as they experience trouble paying their mortgage.
As you can see, we needed the help of other, stronger, national organizations to help make this local effort work.
I know that, in some ways, this approach goes against the grain of United Way’s local mission. But remember that every government official in every community wants to save homes from going into foreclosure, so you already have an audience that is willing to listen to your ideas.
If you can actively bring all of the key players together - and utilize the national resources that are already in place - you have a good chance of making a difference.
Before concluding my remarks, I wanted to discuss one final solution we are working on with some of the nation’s largest mortgage servicers. It’s one I think has enormous potential in reducing foreclosures throughout our country.
Since February, we have been involved with Wells Fargo and Bank of America - two of the nation’s largest banks - in testing software that will make foreclosure prevention counseling and loan workout process much faster and more efficient.
Until now, helping a delinquent homeowner has been very time-consuming. Once the counselor gathers the homeowner’s financial information, the next step is a telephone call or e-mail to the servicer.
Often, the counselor ends up making several calls back and forth to the servicer and homeowner to exchange and verify information. A counselor often faxes information to each party, receives counterproposals, corrects errors, and makes new proposals.
The software - which is called the Early Resolution Counseling Portal - significantly speeds up this process. Once a counseling session has been conducted, the counselor inputs the homeowner’s information into the software. If the borrower can make his or her mortgage payment, and also pay for other essential expenses, the software provides a counselor with 2 potential workout solutions.
The counselor relays this information to the homeowner. If the homeowner decides to accept one of the solutions, the counselor transfers the homeowner’s data electronically to the servicing company. The servicer lets us know within a few days if they will agree to the workout.
We have been testing this software for three months, and approximately 50% of all homeowners that have been counseled have received a workout proposal. This is a high percentage that has encouraged us to expand the program.
The next step is to make this software available to more mortgage companies, as well as 9 additional nonprofit agencies around the country. By making it available to so many parties, we can spread this solution nationwide as quickly as possible.
I believe this initiative has the potential to transform the current model of housing counseling. Faster transmission of data to mortgage companies means homeowners get quicker decisions and counselors are freed up to speak with additional homeowners that need help. Mortgage companies benefit from a lower cost and a more efficient system.
Until this occurs, there will continue to be too many foreclosures in all of our communities. But I hope I’ve provided some ideas that can help you take some action back home. Those actions will give more people more than hope - it may provide them solutions that help save their homes.
Thanks so much for your time today.