Anchorage Daily News

The statewide nonprofit that provides counseling to people delinquent on their mortgages or facing foreclosure is getting hammered by a huge increase in Alaskans seeking assistance.

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Foreclosure-related counseling nearly doubled last year, with a big surge at the end of the year, said Janice Jones, with the Anchorage-based Consumer Credit Counseling Service of Alaska.

"People think (Alaska) escaped the foreclosure crisis, but that's not true," she said.

The increase in counseling is creating a funding emergency at the nonprofit but it also shows the expanding economic impact on Alaska -- especially in Anchorage and the Mat-Su -- from risky loans.

The conventional wisdom has been that Alaska largely escaped the subprime loan meltdown in the Lower 48, which has already triggered hundreds of thousands of loan defaults and the financial failure of some of the lending institutions that offered the risky loans.

But recent statistics show that Anchorage and the Mat-Su, while not nearly as bad off as the Lower 48, have experienced a sharp increase in foreclosures in recent months.

It's not clear why those property owners went into default, but Jones said most of the people coming to her office for help are in trouble because of a "subprime" loan.

They cannot afford the ballooning interest rates on these high-interest rate mortgages, she said, detailing one case where a client's monthly payment went from $450 to $3,000.

ECONOMIC IMPACT

A wave of defaults are likely to have an impact on the local economy.

People who default on their loans generally don't have much money to spend in the local economy and vacant properties can depress neighborhood values, according to a congressional report published last fall by the Joint Economic Committee, titled "The Subprime Lending Crisis."

Using data from the national Mortgage Bankers Association, the report estimated that Alaskans had acquired 13,580 subprime loans by the second quarter of 2007, and 1,010 of them would default by the end of 2009.

Jones said she is worried that the Anchorage economy could get fried, but some economists and real estate professionals said the damage doesn't appear to be running rampant like it is in some Lower 48 cities.

"I don't doubt that foreclosures are growing" said Neal Fried, an economist for the Alaska Department of Labor and Workforce Development. But, he said, statistics show that Alaska had much fewer subprime loan offerings than the Lower 48, and the local housing market appears to be stable, despite a recent slowdown in sales.

That said, the cooling of the Anchorage housing market has already had consequences for the local economy, Fried said.

For example, the local construction industry is expected to lose 500 jobs this year, mainly due to a steep drop in recent residential construction.

THE NUMBERS

Statistics show a big upswing in foreclosure filings in Anchorage and the Mat-Su, plus delinquent loan counseling, at the end of last year.

Lenders filed foreclosure notices on 627 residential properties in Anchorage and the Mat-Su in the final quarter of 2007 -- two to three times the amount filed in any previous quarter of the year, according to RealtyTrac, a California-based firm that tracks foreclosures nationally.

At the Consumer Credit Counseling office, the number of households that sought counseling due to a delinquent mortgage or foreclosure also increased sharply in the final quarter of 2007, compared to the same months of the previous year.

Overall, the number of visits related to a delinquent loan nearly doubled from 2006 to 2007 -- from 277 to 402, with most of the increase occurring in the final part of 2007, Jones said.

"Our counselors are hammered. You feel guilty taking a vacation day," she said, adding that the center is able to resolve two out of three of the foreclosure-related cases it works on.

Another Anchorage-based nonprofit also is handling more calls from people delinquent on a loan or facing foreclosure.

"Just this month, I worked with five people. I don't think I worked with five last year," Barb Worley, lending director for Anchorage Neighborhood Housing Services Inc., said in late January.

FUNDING TROUBLE

The demand for counseling at Consumer Credit Counseling is so overwhelming that the nonprofit expects to run out of grant money soon from its biggest funder, the U.S. Department of Housing and Urban Development.

The nonprofit likely will receive another federal grant soon, due to a recent appropriation signed by President Bush that approved an additional $180 million nationwide for foreclosure counseling.

But the nonprofit's chief executive, Frank Snider, said he doesn't know yet whether the center will be able to make ends meet.

The nonprofit -- which provides many free services to Alaskans, ranging from advice for first-time home buyers to credit card debt counseling -- has already made some tough choices about what services it offers. At one time, it spent more on offering free financial literacy programs, Snider said.

Later this year, the nonprofit might face additional cuts, he said.

He and Jones said the funding squeeze isn't new but it's unfortunate at a time when a lot of people need debt counseling.

"We're spending a lot of time looking for more funding," Snider said.

Find Elizabeth Bluemink online at adn.com/contact/ebluemink or call 257-4317.

Free resources

FREE COUNSELING: The Consumer Credit Counseling Service of Alaska provides free and confidential services to people behind on their house payments or facing foreclosure. Call 279-6501 in Anchorage or 1-800-478-6501 outside Anchorage to schedule an appointment with a certified housing counselor.

TAKE A QUIZ: The National Foundation for Credit Counseling provides a short "Mortgage Realty Check" quiz to assess whether your home is at risk and what you should do. Go to www.housinghelpnow.org.

Getting out of trouble

What to do if you are behind on mortgage payments:

• Call your lender immediately to explain the situation. Get the name of the person you talked to and write a follow-up letter for your loan file.

• If you can't reach your lender by phone, explain your situation in a letter and ask them to contact you. The letter should include your name, loan number, property address and daytime and evening phone numbers.

• The lender will be more likely to consider repayment options if you had a good payment history and you quickly initiate contact after missing a payment.

• A HUD-certified counselor can work with you to review your budget and establish a repayment plan or other foreclosure prevention options to allow you to bring the mortgage current.

• If you receive a foreclosure notice, review your options with a counselor. Alternatives include bankruptcy, a repayment plan or selling your home. A counselor will help you find out which option is best for you.

Information from the National Foundation for Credit Counseling

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