Non-profit Helps Panicked Homeowners with Options and Strategy

March 26, 2007 – Consumer Credit Counseling Service of San Francisco (CCCS-SF) is stepping up efforts to help homeowners keep their property out of foreclosure. The non-profit organization reports a dramatic increase in calls from nervous mortgage holders over the last few months. Payments for many adjustable-rate mortgages (ARMs) and subprime loans have gone up by 25, even 50 percent, leaving millions of borrowers in serious financial trouble. CCCS-SF is urging homeowners who are having difficulty making payments to come to them for information and guidance on how to best approach the problem.

ARMs and subprime mortgages have enabled homebuyers who stretched their finances or had less than perfect credit to purchase property, but the recent adjustment has left many of them unable to afford the higher payment. A good number of homeowners have very little “wriggle room” with their budgets, and not much (if any) savings. Because of this, the slightest fluctuation in expenses and income causes major cash-flow damage. Early intervention – contacting the lender before missing a payment is best, but there are also options for borrowers who are currently behind.

Adjust Finances
The first and most important step anxious homeowners need to take is to analyze their finances and make sensible, realistic changes. This includes developing a comprehensive budget, reducing or eliminating unnecessary expenses, or increasing income with a second or part-time job. To help consumers organize their finances and develop a plan of action, CCCS-SF provides budget and debt counseling, at no charge. Understanding cash flow – both current and proposed – is important before communicating with lenders, who will need that information to help with solutions.

Some homeowners may be able to refinance their loan, trading it in for a longer-term mortgage with less expensive payments, or secure a fixed-rate loan, which offers the security of a consistent rate and payment. However, since refinancing is credit based, this option may not be available for homeowners already in default. Additionally, closing costs can be high, putting them out of a cash-strapped borrower’s reach.

When communicating with lenders, organization is key. The first step is to write a “Statement of the Problem” letter, which clearly and honestly explains why the borrower is, or will be, delinquent. Homeowners should also know their current cash flow situation, as well as the amount of equity they have in the home. With this information, they can begin to present solutions, which may be a forbearance agreement - either lower or no payments for a set period of time, or a loan modification, where one or more terms of the mortgage are changed to reduce the payment.

Homeowners are encouraged to recognize the importance of considering at all their alternatives. If the monthly payments are just too high for comfort they may be able to sell the property and downsize, either by buying a less expensive home or choosing to rent instead.

What CCCS-SF can do
The stress homeowners feel when their monthly mortgage payment goes up can be overwhelming. CCCS-SF counselors are ready to help by discussing all the feasible methods a borrower can use to keep the home, creating a detailed budget, and developing personal strategy to achieve their goal.

CCCS-SF is a HUD certified housing counseling agency and an accredited nonprofit financial counseling and personal finance resource center. In addition to housing education services, CCCS-SF offers money management assistance and a debt repayment program. For more information contact Erica Sandberg at (415) 788-0288 ext. 224, or log onto

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Copyright © 2007 CCCS of San Francisco
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