It appears Michael Bovee took the NFCC challenge to think bold about consumer services to heart and submitted this guest post.
Steve published his reaction to the state of the industry speech made by Keating at the recent NFCC conference here.
There is a great deal contained in the address by Keating to comment on. The less than full balance efforts, as I understand them, are flawed and where I would most like to focus. I will reserve those comments for another time.
What I would like to talk about is housing counseling. Not as it has been being performed, but how it could be developed to perform.
CCA’s have been, in my opinion, perfectly positioned to do much more than what is currently being done at a national level for both housing and debt relief.
I am encouraged by Keating’s comments to be bold. Her speech contained 3 references to “thinking boldly” and one reference to consider “moving boldly”.
I would encourage nonprofit CCA’s boldly insert themselves into national and public discussions where they are suited to participate as part of the solutions.
Some examples of being bold would be to help develop fresh programs to mitigate foreclosure and to proactively push for additional solutions to the student loan debt problem.
Help Home Owners:
While CCA’s received funding for housing counseling, they were not empowered with needed tools to bring consumers effective results. CCA’s need to get empowered. Work with others and come up with a better way to insert yourself as a solution provider.
Develop and push for a plan that allows you to receive referrals from multiple sources to mitigate foreclosures through some form of deed in lieu process that includes the home owner simultaneously signing onto a lease option to purchase at current market value in a 3, 5, or 7 year time frame. A way to accomplish this would be through structured budget counseling where you could certify and package homeowners as financially qualified for a deed in lieu lease option.
Get your talking points together. Here are some notes to help start the discussion:
- Nonprofit CCA’s have staff trained to determine budgets and spending. You have data systems in place to substantiate and document home owner financials. You will develop the files meeting set criteria for a lease option where rent does not exceed a set percent of consumer income (25% to 35%).
- You will develop a budget and payment schedule around other existing debts such as unsecured credit cards.
- Because you are a CCA with offices or licenses in one or more of the hardest hit states with high foreclosures (NV, CA, AZ, FL) you can suggest a pilot be funded prior to a national roll out.
- Your being the front end for deed in lieu/lease w/option would help lessen the load on overwhelmed loss mitigation servicing departments.
- Your deed/option program will keep people out of foreclosure and lighten the load on overwhelmed courts.
- Your deed/option program is set up to keep people in their homes and communities which lessens neighborhood blight.
- Your deed/option alternative puts together individual plans that return consumers to responsible spending which could help put a floor on economic deterioration at the local, state and national level.
- The program could help your financial services industry partners from having to fully recognize and book losses with short sales and the sale of foreclosed homes. By kicking full loss recognition down the road 3 to 7 years banks will have a better and smoother opportunity to repair balance sheets (assuming the reliably creative accounting used to extend and pretend thus far can be continued. I think it can).
- Servicers can still retain servicing rights and the servicing income. It could be adjusted, but could still exceed their revenue from foreclosure (which often explains the predilection not to modify a loan). Come up with a formula that puts them on your side of the issue.
- During the first several years of the program housing values may have found the floor. In fact, your deed/option program may be the catalyst for home values to stop declining in certain areas.
- Your customers will be maintaining care for the property, especially given the option to purchase contract provides for their lease payment to pay down the fair market price of the home that can be established at the time the program is started. Banks could even run with assumptions (depending on how long the option is extended), to apply lease payments to the FMV at the time the option is exercised.
- MBS investors holding the bag on all the crap sold to them may get behind this. Get them involved in the discussion. You may just be saving a portion of your neighbor’s pension. You may even save your financial services partners from more MBS investor lawsuits. That has to be worth some grants & funding.
- You have infrastructure and human capital that is not being utilized for DMP’s. Your counselors can be trained to use a developed system for the deed/option plan in relatively quick order. You are possibly one of the few groups in the nation with “ready to go” infrastructure other than the banks and servicers themselves and they are overwhelmed. Rather than looking at cutbacks and mergers, get involved as part of (even help create) needed solutions and start hiring from the pool of the unemployed in the FIRE industry. Hire recent college grads who cannot find a job to service their student loans (that’s another topic). Look to partner with someone like LPS in developing automation.
- Talk to HUD, FHA, Fannie, Freddie. Get in front of your home state legislatures. Take a credible model to DC. Talk to local and state governments about all of the uncollected tax revenue while home owners squat, unable to pay a reset mortgage, or where the home is vacant and banks delay foreclosure.
- Of the 750,000 homeowners the NFCC members have worked with in the last year, how many of them could have been helped by a deed in lieu with a lease and purchase option? Mine that data and find out. Get AICCCA and ACCPRO members to do the same. Use that data to show how effective your agencies can be if you are empowered to show consumers real solutions. That data is valuable. How many of the ¾ million were victims of forced placed insurance? How many were low income vs. middle income? Mining that data and creating a national discussion about the findings can provide the nation a great service and get policy moving in a positive direction. Look for partners in this effort like: Consumers Union, National Consumer Law Center, Consumer Federation of America, PIRG, Center for Responsible Lending. These groups care about the housing mess and the lower income demographic you touch daily. Look to academia for assistance as well. Move the discussion forward.
- Get in front of the ongoing state AG negotiations with the banks on foreclosure fraud. Position yourselves with BOLD thinking and solutions. With settlement figures like 20 billion being thrown around, position your agencies to deliver solutions in order to receive funding. Your work and need to expand, if able to facilitate some type of front line process for a deed/option program, may even require more than 1 billion in funding.
- While pushing a deed in lieu lease option agenda, get involved in the national mortgage fraud settlement discussion and position yourselves as a go to resource to facilitate the modification file work that will be needed to be put together as part of any wider settlement. Your funding could come from the settlement dollars. Put yourself in this type of position successfully and I begin to think not enough of you are licensed in FL, AZ, NV, CA, and other hard hit states.
- I realize there is a very real chance that the state wide AG settlement on mortgage fraud has lost traction. Individual states have defected somewhat by pursuing their own individual course. Get in front of the individual states and position yourselves to provide a piece of what will be required as part of any settlement after it is reached in that state. Your funding can come from the settlement or be written in. If written in, get the dollar commitment inserted (you have, after all, suffered arbitrary funding cuts and other issues from your partners).
- Make no mistake, there will be state and/or national and federal mortgage fraud settlements. Your financial service partners will not survive otherwise.
Think bold. Think big. Think expansion.
Student loans are the next debt bubble to pop. Government loans qualify for IBR plans where private loans often do not (private loan investors and servicers often refuse to offer an IBR solution). CCA’s could develop a strategy and get in front private student loan servicers with a goal of being able to structure lower payments, not just facilitating regular payments on current loans as part of the DMP plan . The tsunami of defaulting student loan debt has only just begun. Get involved in current discussions on this issue and be proactive by starting new discussions. Here again, you have data. You speak with or serve hundreds of thousands of people nationwide every month. Aggregate the student loan data, map out a message and agenda, then progress it.
These are 2 ideas that are, at a minimum, worthy of not just thinking and consideration, but actions.
The third is being able to provide debt settlement solutions for those who cannot qualify for a DMP proposal, or who are forced to drop from one. There have been resources available to you to be able to offer people a debt settlement tool for some time. Your infrastructure suggests you should have already been doing so for years. In fact, as counselors to consumers looking for relief from overwhelming debt, not having a settlement discussion and education in place for the consumers suited to it is a major failure on the part of all leadership in the CCA space. I do look forward to later discussions on this topic.
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