Foreclosure Activity Increases in First Quarter 2009
Published: April 23, 2009
U.S. foreclosure activity in March increased 17 percent from February and 46 percent from March 2008.

On April 16, 2009, RealtyTrac released its U.S. Foreclosure Market Report for the first quarter of 2009. Foreclosure filings (default notices, auction sale notices and bank repossessions) were reported on 803,489 properties in the first quarter. This represents a 9 percent increase from the previous quarter and an increase of nearly 24 percent from the first quarter of 2008. The report showed one in every 159 U.S. housing units received a foreclosure filing during the quarter.

The March and first quarter 2009 totals were the highest monthly and quarterly totals since RealtyTrac began issuing its report in January 2005, despite a decrease in bank repossessions, which were down 13 percent from the fourth quarter of 2008 and 3 percent from February totals.

Nevada continued to document the nation's highest state foreclosure rate, with one in every 27 housing units receiving a foreclosure filing. Nevada's rate accounts for more than five times the national average. Arizona posted the nation's second highest state foreclosure rate, with one in every 54 housing units receiving a foreclosure filing and California had the nation's third highest rate, with one in every 58 housing units receiving a foreclosure filing.

Other states with foreclosure rates ranking among the top 10 in the first quarter were Florida, Illinois, Michigan, Georgia, Idaho, Utah and Oregon. Sixty percent of the nation's foreclosure activity in the first quarter came from five states: California, Florida, Arizona, Nevada and Illinois.

FTC Launch Web Sites to Help Consumers Cope with Financial Problems
Published: April 23, 2009
Ask Doctor Debt and Money Matters aim to inform consumers about credit, debt and protecting themselves from financial peril.

The ACA International Education Foundation recently launched a new consumer Web site, Ask Doctor Debt, which is designed to provide free and unbiased answers to consumers' debt questions.

The ACA International Education Foundation is a nonprofit organization. Its primary mission is to serve consumers who are challenged by debt by providing them with tools and resources to improve their financial literacy. The Foundation was created by the members of ACA International, The Association of Credit and Collection Professionals, and is an extension of the desire ACA International members have to treat each consumer with dignity and respect.

Also in the month of April, the Federal Trade Commission launched a new Web site designed to help consumers who are dealing with debt, struggling to find a job, trying to create a budget or trying to spend wisely during these difficult times.

The Web site, Money Matters, offers short practical tips, videos and links to reliable resources for more information on topics like credit repair, debt collection, job-hunting and jobs scams, vehicle repossession, managing mortgage payments and foreclosure rescue scams.

Master the Art of Persuasion
Published: April 23, 2009
Negotiation skills are more important than ever as collectors work with consumers during difficult economic times.

Finding effective collection techniques is always a challenge for third-party collection agencies, especially in difficult economic times.

According to ACA Certified Instructor Harry A. Strausser III, IFCCE, MCE, president of The Remit Corporation in Bloomsburg, Pa., agencies have had to significantly change their collection methods in the last year to remain successful.

“The industry has definitely moved toward a 'building payers' mentality,” he said. “We've attempted to at least keep the culture of paying present for consumers and have accepted lower payment plans than normal.”

Although collection agencies should still ask for “payment in full,” Strausser said they should be prepared to negotiate smaller and longer repayment plans in the current economic environment.

“The desire to pay has not changed, people know that they should pay for goods and services they have received,” Strausser said. “But the priorities of bill paying have changed since they want to keep their homes, their cars and keep their utilities on.”

When training collectors to use persuasive collection methods, role playing can be one of the most effective ways to learn how to appeal to a consumer in difficult economic times. Strausser recommends collectors think about what would motivate them to pay.

The type of collection tactic used on an account can depend on the type of service the consumer received. “Do some internal brainstorming with the collection staff relative to the kind of business product being collected,” he said. “Focus on the most productive team members and interview them for the techniques they're incorporating into the process.”

Strausser said he urges all collection offices to focus on making creative changes to their collection approach until economic conditions improve. Although financial resources may be tight, it is imperative to continue training collection staff on the best approaches and persuasive tactics to increase recoveries.

“An educated staff is a more successful staff and a more successful staff is a more motivated staff,” he said. “A more motivated staff forms the foundation for weathering this economic storm.”

Consumer Delinquencies Continued Rising in Fourth Quarter 2008
Published: April 20, 2009
The fourth quarter of 2008 saw rising delinquencies in almost every loan category, according to an ABA report.

Job losses continued taking their toll on consumer finances during the fourth quarter of 2008, as evidenced by rising delinquencies in almost every loan category. The U.S. economy lost nearly three million jobs in 2008, with nearly two million of them occurring in the fourth quarter.

The Consumer Credit Delinquency Bulletin reported the composite ratio, which tracks eight closed-end installment loan categories, rose 32 basis points to a record 3.22 percent of all accounts. The bulletin is published by the American Bankers Association.

According to the bulletin, home equity loan delinquencies rose 40 basis points to 3.03 percent of accounts, setting a new record. Home equity lines of credit delinquencies also reached a new record, rising 31 basis points to 1.46 percent. Every category saw rising delinquencies except mobile home loans. The report defines a delinquency as a late payment 30 days or more overdue.

Credit card delinquencies also increased from 4.20 percent to 4.52 percent, but still remain near the four year average of 4.47 percent. This is likely due to the ability of card holders to adjust their monthly payments, unlike other loans with fixed payments.

The composite ratio is made up of eight closed-end installment loan categories: home equity, property improvement, indirect auto, direct auto, marine, RV, mobile home and personal. All figures are seasonally adjusted based upon the number of accounts.

Americans Save More, Prepare for Long Recession
Published: April 20, 2009
Survey shows 64 percent of Americans know someone who has lost their job in the past six months.

A new survey by Econ4U, a project of the Center for Economic and Entrepreneurial Literacy, shows how Americans are responding to the financial crisis. Highlights from the survey of adult Americans revealed:

• 64 perent know someone who has lost their job in the past six months.
  
• 40 percent have begun saving more because of concerns about the economy.
  
• 76 percent expect the recession to last for at least another year.
  
• 64 percent have less than six months of savings in case they lose their job while 39 percent have two months or less.
  
• 19 percent have experienced trouble accessing credit in the past six months.
  
• 83 percent of survey respondents said they expected a tax refund this year. Thirty-one percent were planning on spending the refund, 29 percent expected to put it into savings and 18 percent said they would use it to pay off existing credit card debt.

Latest Mortgage Metrics Reflect Declining Credit Quality
Published: April 9, 2009
The OCC and OTS released a report for the fourth quarter of 2008 providing performance data on first lien residential mortgages..

On April 3, 2009, the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) released their quarterly report on first lien mortgage performance for the fourth quarter of 2008. This report provides a comprehensive picture of mortgage servicing activities of most of the industry's largest mortgage servicers, covering approximately two-thirds of all mortgages outstanding in the United States and incorporating information on all types of mortgages serviced.

The latest report showed credit quality continued to decline in the fourth quarter of 2008. At the end of the year, just under 90 percent of mortgages were performing, compared with 93 percent at the end of September 2008. This decline in credit quality was evident in all loan risk categories, with subprime mortgages showing the highest level of serious delinquencies. However, the biggest percentage jump was in prime mortgages, the lowest loan risk category and one that accounts for nearly two-thirds of all mortgages serviced by the reporting institutions. At the end of the fourth quarter, 2.4 percent of prime mortgages were seriously delinquent, more than double the 1.1 percent recorded at the end of March 2008.

Consistent with last quarter's findings, the report showed that redefault rates on modified mortgages were both high and rising during the first three quarters of 2008, with loans modified in the third quarter showing the highest redefault rates. For example, the percentage of modified loans that were seriously delinquent (60 or more days past due) after eight months was 41 percent for loans modified in the first quarter and 46 percent for loans modified in the second quarter.
The reasons for high redefault rates are not clear. As noted in the previous quarter's report, high redefaults could be the result of a worsening economy, excessive borrower leverage or poor initial underwriting.

“This new data shows that, in the current stressful environment, modification strategies that result in unchanged or increased mortgage payments run the risk of unacceptably high redefault rates," said Comptroller of the Currency John C. Dugan. "They should only be used on a case-by-case basis where borrowers and servicers can have confidence that the modification is likely to be sustainable. The data also showed that modifications that reduced monthly payments significantly had much lower re-default rates.”

Based on the results, the OCC and OTS directed each of the banks and thrifts that provide data for the Mortgage Metrics report to assess their 2008 loan modifications, especially those that increased monthly payments or left them unchanged, to ensure criteria applied to those loans, and to loans modified in the future, result in affordable and sustainable modifications.

Effective Training Helps Agencies Better Adapt to Change and Reduce Turnover
Published: April 9, 2009
Providing ongoing education builds employee knowledge and company loyalty.

For the credit and collection industry, creating and maintaining an effective training program is not only ideal, but often necessary because of the constant changes to industry laws and regulations.
Organizations operating in one of the most regulated industries not only have to train new employees to stay in compliance with current laws, but also need to provide continuous training for current staff to make sure they're up to date on the issues.

According to ACA Certified Instructor Tina Hanson, vice president of State Collection Service in Madison, Wis., senior management and training staff need to communicate changes to laws effectively and clearly to their employees in order to avoid violations. “You cannot train enough when it comes to laws,” Hanson said. “It's important to be able to adapt quickly to the changes.”

Since the credit and collection industry changes so often, it's important to hold training more than once a year, especially for newer staff members. Hanson said her employees take part in at least two hours of training each month, whether it be for collection strategies, compliance updates or changes to state or federal laws.

Another way to update staff members on industry changes that affect organizations on the federal level is to hold weekly meetings. ACA Certified Instructor Terri Boettcher, vice president of collections for BC Services Inc. in Longmont, Colo., said it's important to remain flexible in this industry. “My staff understands that the only constant is change,” she said. “I tell them they'll never be bored with this industry.”

Continuous training also provides supervisors the opportunity to recognize their employees, which can increase their motivation to succeed. “Recognizing your employees for their hard work validates their knowledge and dedication they've given to their position,” Boettcher said.

Taking the time to effectively train staff members on all aspects of the industry can also reduce turnover at an organization. According to Boettcher, a well-trained staff is more likely to be confident in what they do. “Collectors need a level of confidence,” she said. “If you're not confident, you're not going to be comfortable in your job.”

Training can vary from business to business, which makes it even more important to train using a variety of methods. The most effective approach is to get staff thinking critically, said Hanson. “Ask them questions to get them thinking,” she said. “Everyone learns differently so you have to try a combination of things to appeal to everyone.”

Special Care is Required When Collecting on Accounts From the Deceased
Published: April 2, 2009
Collecting the debt of a deceased consumer presents many unique issues for debt collectors.

A debt collector must approach estate collection with compassion. Collecting on accounts from the deceased is an incredibly sensitive matter, requiring a delicate appreciation for seeking recovery of legitimate financial obligations and for the context in which such collections are undertaken. Collection efforts regarding a financial obligation where a consumer has passed must comply with the Fair Debt Collection Practices Act (FDCPA) and state law.

The FDCPA expressly prohibits debt collectors from engaging in any harassment or abuse; from making any false, deceptive or misleading representations; and from using any unfair means in connection with the collection of a debt from any person, including the executor or representative of an estate or other relative.

In order to comply with the FDCPA, a collector may not communicate that an individual, other than the deceased, is obligated to pay the decedent's debt unless the collector has obtained information that indicates otherwise.

In order to commence collection from the decedent's estate or through probate, a collector must contact the administrator or executor of the decedent's estate, often referred to as the personal representative. The law permits debt collectors to contact relatives or other third parties to identify the personal representative.

The personal representative is afforded the full protection of the FDCPA. This includes the ability to cease communications with the collector regarding the debt. If a collector receives a written notice from the personal representative requesting the collector cease communication or refusing to pay the obligation, the collector is obligated to comply with this request.

If a collector seeks payment of a debt from proceeds or an estate administered by a personal representative, the debt collector must provide a validation notice informing the personal representative of certain information regarding the existing obligation. The communication should include the Mini-Miranda as well as any state-required text.

In situations when the estate is insolvent or unable to pay all debts, state law further determines the order in which creditors are satisfied. In these cases, the personal representative will sell some of the estate's property to pay the outstanding debts. After liquidation if claims still remain, the assets are divided and distributed to the creditors proportionally. Although personal representatives have the authority to act on behalf of the estate, a personal representative generally is never personally liable for the decedent's debt.

Collecting the debt of a deceased consumer presents many unique issues for debt collectors. Therefore, it is important to develop policies and procedures to assist in the collection process. It is possible for creditors to recover debts from deceased consumers, but due to the specific time parameters, it is of the utmost importance that debt collectors act with compassion, diligence and efficiency.