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Higher Incomes Seeking Help From Consumer Credit Counseling
Q&A with Suzanne Boas, president of Consumer Credit Counseling Service (CCCS) of Greater Atlanta Inc.
September 30, 2008
Atlanta Woman: The mortgage crisis has been with us now for more than a year. Is
your agency still experiencing a large number of people seeking help to avoid foreclosure?
Suzanne
Boas: We've seen a significant increase this year in the number of people who are
delinquent on their mortgage payments and looking for help. We've provided housing counseling to
more than 30,000 people in the first half of 2008, nearly equaling the agency's total number of
housing clients for all of 2007.
AW: Are you seeing an increase in middle class homeowners?
Boas: Initially the national mortgage crisis affected mostly low-income
borrowers, but is now spreading to people with higher household incomes. 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.
AW: What is causing middle class homeowners to get into trouble?
Boas: Many of our middle class clients experienced a drop in income in the past
year and began to use credit cards for everyday living expenses. Others used home equity loans to
cover routine expenses. Now lenders are tightening standards and people who have been living on
credit have very limited places to turn.
AW: Are there some professions that have been hit harder than others?
Boas: We are hearing more and more from people who made very good incomes until
2007 in the construction, real estate and mortgage industries. In some cases both spouses were in
real estate related businesses, so the housing downturn and credit crisis hits them twice as hard.
AW: Shouldn't people in the mortgage business or residential real estate business
have known better than to become overextended?
Boas: That's easy to say in hindsight, but people in Atlanta, where growth has
been strong for so long, tend to be an optimistic group. And people who work in real estate in
Atlanta tend to be among the most optimistic professionals. There is almost always an upside and a
downside to any proposition. Problems sometimes follow when someone only considers the upside:
"This opportunity is golden. I know it is really going to take off!" It's is sometimes hard
for the entrepreneurial type to consider, "What if this doesn't work, how will I pay my bills?"
AW: Are you working on any new solutions to help homeowners?
Boas: We are working with Wells Fargo and Bank of America on a new program to
speed up the loan workout process to help homeowners avoid foreclosure. Our housing counselors now
have access to software that enables them to review in real time workout options specifically
available to each homeowner. They are able to transfer a homeowner's data electronically to their
mortgage servicing company immediately after the counseling session. This helps consummate workouts
more quickly.
The software will benefit everyone. It will make it easier for both counseling agencies and
mortgage companies to work out solutions for homeowners and stave off foreclosures. We believe this
will enable us to eventually help tens of thousands of additional homeowners avoid foreclosure.
AW: How cooperative are lenders in helping homeowners renegotiate loans,
especially once they've fallen into default?
Boas: Contrary to what many homeowners believe, lenders want to find a way to keep
people in their homes if at all possible. Studies show about half of the people who lose homes to
foreclosure never contacted their lender. We hope that people who start to fall behind on their
mortgage payments will try to contact their lender. If they have trouble getting through to the
right person, they should call a third-party, nonprofit housing counselor who knows how to get a
decision-maker on the phone.
AW: How successful is housing counseling in helping people avoid foreclosure?
Boas: Our housing counselors are able to help seriously delinquent homeowners
avoid foreclosure about 70 percent of the time. That doesn't always mean that the client remains in
the house. Some consumers have just taken on a house they can't afford, even if a lender relaxes
some of the terms of their loan. In that case the best solution may be to deed the property back to
the lender or work with the lender to sell the house for less than the loan balance. But generally
when homeowners fall a couple of months behind on their mortgage because of a temporary setback,
housing counseling can help them remain in their home.
AW: The general consensus among analysts seems to be that lending practices became
way too lenient in recent years. Is the best way out of the credit crunch to go back to the days
when loans required large down payments or other collateral?
Boas: For generations it was very difficult for a large segment of the population
to get credit when they needed it, even when they had steady income and paid their limited
obligations on time. So I think it would be a shame if we returned to the very strict lending
practices of a generation or two ago.
While one very understandable reaction to the current economic conditions is tighter lending
standards, I hope another one is that consumers realize they need to exercise more personal
discipline when it comes to borrowing. We frequently hear the lament from financially distressed
clients that their lender must have thought they could handle the debt they are struggling with or
they wouldn't have made the loan. That may have been a reasonable thing to think a generation ago,
but that isn't true anymore with all of the new and complicated financing products and automated
credit scoring models available.
In short, there needs to be more discipline on both the lender and consumer side of decision
making going forward.
