Remarks by Suzanne Boas at Leadership Atlantamartes, 12 de mayo de 2009
Thank you, Pin Pin, for that kind introduction.
Good morning, everyone. I would like to address three issues this morning: First, our service to residents of metro Atlanta; second some emerging trends that we are seeing among our clients; and third, where we see the economy going.
Before I turn my focus to those three issues, I would like to provide a brief introduction of my agency. While I know that many of you are very familiar with my organization, others are not as familiar with us.
Consumer Credit Counseling Service of Greater Atlanta is a full-service financial counseling agency. We were founded in 1964 and are one of the nation's oldest nonprofit credit counseling services. We are headquartered in the United Way building in downtown Atlanta but we have branch offices throughout north Georgia, stretching from Rome to Stockbridge.
We help people experiencing a broad range of personal finance problems, including foreclosure prevention. Our programs are designed to help people in financial distress assess their financial situations, set clear goals and establish realistic, written action plans. We see ourselves as a financial emergency room, moving our clients from crisis to control.
While we work collaboratively with most banks and mortgage companies - including SunTrust, of course - our work is focused on individual consumers. Our goal is to identify the best steps for each of our clients to take and to support them on the road to financial recovery.
Because of the growing need for our services, we have been expanding - quite dramatically, in fact. Our organization has now grown to approximately 585 employees. Through mergers over the past several years, we have acquired branch offices in Florida, Tennessee and Mississippi. And our growing telephone and Internet staff provides 24/7 counseling to clients in all 50 states, in both English and Spanish.
Based on the current economic environment, it's no surprise that 2008 saw more consumers turning to us for help than in any previous year. Last year, we provided counseling and education services to more than a half-million people. We expect to help close to 700,000 people this year.
Despite some indications that our national economy may be stabilizing, the number of homeowners in distress remains at an alarming level. More than 3 million homes are currently in the process of foreclosure and 11 percent of all mortgages are seriously delinquent. Foreclosure filings are increasing, rising 17% in March compared to February.
As a result, property values are declining just about everywhere, and at record rates. The S&P/Case-Shiller home price index for 20 cities fell 19 percent in January from a year earlier. Since home prices peaked in mid-2006, they have declined about 21 percent nationally. Although Atlanta enjoyed a longer rise, our home prices have dropped as well, following the national trend.
Last year, we conducted counseling sessions for 81,368 people in north Georgia. This is a 25 percent increase compared to only two years ago.
The number one reason these consumers turned to us was for basic budget and credit counseling. We provided this service to more than 31,000 people in metro Atlanta last year. People who reach out to us for this service generally still have their housing expenses under control but are struggling with unsecured debt and often cannot make even the minimum monthly payments on their credit card bills.
We also continue to see annual increases in our bankruptcy counseling services. Nearly 27,500 area residents sought counseling before considering filing for bankruptcy in 2008, a sizable increase compared to 2006.
However the real surge for counseling during the past two years, both locally and nationally, has been driven by the foreclosure crisis.
Last year more than 47,000 Georgians called the national foreclosure prevention hotline that we help staff. Those numbers continue to grow. Through the first four months of 2009, 27,600 Georgians have called the HOPE hotline in an effort to avoid foreclosure.
Our counselors have been able to help tens of thousands of these people save their homes. Our research shows that, one year after counseling, 71 percent of the clients we have counseled have totally avoided foreclosure and 80 percent are still in their homes.
While we are able to help many people save their homes from foreclosure, the foreclosure crisis has had a devastating impact on many Atlanta neighborhoods.
For instance, southern portions of DeKalb and Fulton counties and neighborhoods near downtown Atlanta have seen a much higher concentration of foreclosure than other area communities.
Harvard researcher Mark Duda has done an exhaustive study of the impact of foreclosures on metro Atlanta during this decade.
His research started in 2001. While most of the country was not experiencing a serious mortgage problem at that time, some neighborhoods in Atlanta, DeKalb and Fulton counties were already experiencing high levels of foreclosure activity. On this map of DeKalb and Fulton counties, the darker the color the higher the rate of foreclosure with white representing no foreclosures and dark burgundy representing a rate of 20% or more.
As you can see, during the 6 years Duda studied foreclosures spread rapidly in certain parts of these two counties. Among his conclusions was that foreclosures were most prevalent in neighborhoods with older housing stock and higher concentrations of minority residents. Data from our client base supports the disproportionate representation among minority groups.
So looking forward, do we see good news or bad news on the horizon? The answer is some of both.
First, the good news.
Realty Trac reports that in the first quarter of this year, metro Atlanta had 21,880 properties with foreclosure filings, or one in every 97 households. This represents a decrease of 3 percent from the first quarter of 2008. But we have to remember that during this time frame many lenders had instituted temporary moratoriums on foreclosures at the request of the Obama administration.
Turning to the bad news ---
The unemployment rate for metro Atlanta in March rose to 9.1 percent, which is an historic high. To put that rate in perspective, only a year ago, the unemployment rate was 5.2 percent.
The record number of unemployed metro Atlantans means many people are dipping their savings - that is, if they have any savings. Others will begin or continue using credit to pay for essential items, such as food and gas, and still others may need to consider bankruptcy.
As part of a contract with the Georgia Department of Labor, our agency's Education Department teaches classes to the newly unemployed. One of the locations where we teach is the Norcross office in Gwinnett County.
That office alone reported that more than 4,600 people filed new claims for unemployment insurance in March. This means more than 1,000 new people each week had lost their jobs and filed for unemployment insurance - just in Gwinnett County.
A second concern that we have is a new wave of homeowners who will be unable to make their mortgage payments.
We are now beginning to hear from large numbers of homeowners with interest-only mortgage loans. There is nothing inherently wrong with interest only loans, which have been used for years by savvy, disciplined money managers. Unfortunately, though, over the last 5 years a lot of people used interest- only mortgages to buy more house than they could afford.
Many buyers believed they would build equity in their home as the value increased, which would provide the capital to convert the interest only loan into a conventional loan.