Press Releases and Media Advisories
Mortgage Lenders and Nonprofit Counseling Agencies Must Partner to Prevent Foreclosures
September 2, 2005, 2:33 pm
A Credit Communique from Springboard urging the mortgage industry to reach out to credit counselors to prevent foreclosures.
As more and more Americans utilize interest-only, piggyback, and various adjustable payment mortgage loans to secure a place in the ownership society, any unexpected economic dislocation like gas price hikes, interest rate increases, or catastrophic family or natural events can raise the specter of foreclosure. Studies have shown that borrowers who receive independent credit counseling improve their credit profile versus those who do not, with the greatest improvement occurring with consumers in lower credit score ranges.
AMC Mortgage Services (AMC)* credit counseling partnership offers objective assistance to delinquent borrowers A program launched two years ago by AMC exemplifies best servicing practices to help delinquent borrowers. AMC refers distressed borrowers to a nonprofit financial counseling agency (Springboard) to head off credit problems for their customers.
AMC personnel watch for warning signs such as delinquencies, talk of bankruptcy, or recent changes in household finances
and advise applicants of the availability of free and independent counseling services. AMC counts on the counseling
agency to gain insights necessary to come up with comprehensive solutions for debt -burdened customers. A key component of the partnership is that the lender provides funding for the counseling and education and that the funding is not tied to the outcome of the session. AMC’s best servicing practices can be found at www.ameriquestmortgage.com/press.html.
Benefits to Distressed HomeownersOnce referred, these customers may feel more at ease because they are relying on the advice of an objective outside party. Well trained credit counselors can develop a more trusting relationship with the borrower. Counseling agencies have numerous nationwide referral sources available to consumers. Another advantage is credibility with unsecured creditors for negotiating a debt management plan – something a lender can’t do.
Benefits to Lenders Proactive counseling referrals can have a significant reduction on losses incurred in a mortgage portfolio because loans that may have gone to foreclosure may be remedied otherwise in a non-collection oriented environment. Utilizing a reputable credit counseling agency can serve as an additional mechanism to enhance rating agency and investor confidence. Rating agency Standard and Poor changed its assessment criteria for interest only loans recently out of concern for increased defaults.
Forecast 2006There may be a softening of home prices and sales in 2006. The Fed expects to maintain a steady monetary tightening campaign in the months ahead. Mortgage lenders and servicers have ready assistance available from community organizations.
About Springboard Nonprofit Consumer Credit Management
Springboard is a nonprofit credit education and financial counseling organization founded in 1974. The agency offers personal financial education and assistance with money, credit and debt management through confidential counseling. Springboard is accredited by the Council on Accreditation, signifying high standards for agency governance, fiscal integrity, counselor certification and service delivery policies. The agency provides pre-bankruptcy counseling and debtor education as mandated by the bankruptcy reform law. Springboard is a HUD approved housing counseling agency and a member of the National Foundation for Credit Counseling, a national organization of nonprofit credit counseling agencies. The agency has several locations in California and offers face-to-face and nationwide phone counseling services. For more information on Springboard, call 1-800 WISE PLAN (1-800-947-3752) ext. 7750 or visit their web site at www.credit.org.
