Who You Gonna Call?

Consumers are drowning in bad advice about their troubled mortgages.


Nic Cage, Mel Gibson, Toni Braxton, Dr. J, and Chamillionaire are just some of the entertainers and athletes whose foreclosures, defaults (strategic or otherwise), or other troubles with creditors and financial institutions made headlines.

“Homes of celebrities and other well-off individuals are making up an increasing percentage of the overall foreclosure tally,” senior vice president of LPS Applied Analytics Herb Blecher told Forbes magazine. The use of trusts and straw buyers for purchases increases the complexity of foreclosing on the property for lenders, and many times, lack of ability to pay isn’t the driving issue.

“We have our share of celebrities and professional athletes with million-dollar-plus homes that can't fathom keeping this underwater home," Jon Maddux, chief executive of YouWalkAway.com, told Forbes. "They think it's a bad investment, and maybe their financial planner told them to call us."

Many credit unions are not involved with the jumbo or mini-jumbo mortgage markets that appeal to celebrities, but the marketing or rather mismarketing of strategic default is increasingly bombarding everyday borrowers (including your membership) from all directions.

The strategic default industry relies on the idea of convenience. They suggest working with an FI is improbable or too time consuming, and that homes should not be viewed as commitments but as investments that can be dumped when they turn sour. This strategy relies on making consumers feel powerless and isolated, like a solution is never within their grasp. The message is clear: give up!

Credit unions must vigilantly counteract these notions by highlighting the essential role of member interaction in their mortgage modification solutions (from the first sign of difficulty, to a final resolution). Understanding, coupled with empowerment, beats a pity party any day. Help members think of the long term repercussions of their decisions and follow up with examples of cost effective solutions or real examples of member success as it is achieved.

Continually remind homeowners that their fight is a worthwhile one and (as long as they're part of the cooperative) something they'll never undergo alone.