Community Empower Preparedness and Interaction Training

1. Community Empower Preparedness and Interaction Training

2. Financial and Home Loan Counseling Training • What is Preparedness Counseling? • How do you fit in? • What rules govern the Home Loan counseling industry? • Using the Community Empower Preparedness Infrastructure: • How does the system help me with a case diagnosis? • Defining the prospective Homebuyer’s Case: • Where does the consumer stand? • What is important to the consumer? • Customer Case Studies: • Understanding the situation • Recommending a resolution program • Getting a consumer started in the program • Reviewing Expectations • Managing the new customer – when to follow-up • Customer Recovery: • Redirect the consumer to their original goal • Principles the consumer should consider adopting 2

3. What is Preparedness & Home Loan Counseling? • Not what you typically think of when you hear: “Counseling” • It is all about the person learning to take action and prepare mobilization, living successfully on a budget, managing credit and preparing for home ownership or other key financial goals. • Key: Use CE to help them “do their own Financial Management.” • You coach the person as the system reveals what items must be addressed for maintaining financial strength. Their journey to ‘loan preparedness’ has the side-benefit of learning to improve their credit health. • Community Empower is a set of tools that provides the consumer high quality, and objective advice. • It’s the “new” credit health and home loan counseling system. • Good counseling is about coaching a person to find and execute the best plan to help themselves. As a good CE Coach you will: • Provide encouragement and accountability • Give reasons to change poor spending behaviors into good financial choices • Help the customer adopt a new mindset… a longer time-frame perspective • Help shift attitudes from pure consumption of goods toward building wealth 3

4. What is credit scoring? • Credit scoring is a system creditors use to help determine whether to give you credit. • Scoring evaluates information about you and your credit experiences, such as: • your bill-paying history, • the number and type of accounts you have, • late payments, collection actions, • outstanding debt, and • the age of your accounts • Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. • A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. • A total number of points -- a credit score -- predicts how creditworthy you are and how likely it is that you will repay a loan and make the payments when due. • Credit scoring is used as a standard today because it is based on real data and rigorously proven statistical models that produce objective credit evaluations. 4

5. How is a credit scoring model developed? • To develop a model, a creditor selects a random sample of its customers, and analyzes it statistically to identify characteristics that relate to creditworthiness. • Then, each of these factors is assigned a weight based on how strong a predictor it is of who would be a good credit risk. • Under the Equal Credit Opportunity Act, a credit scoring system may not use certain characteristics like: • race, • sex, • marital status, • national origin, • or religion. • However, creditors are allowed to use age in properly designed scoring systems. But any scoring system that includes age must give equal treatment to elderly applicants. 5

6. Common Question: What can I do to improve my score? • Credit scoring models are complex and often vary among creditors and for different types of credit. • Scoring models generally evaluate the following types of information in your credit report: • Have you paid your bills on time? • What is your outstanding debt? • How long is your credit history? • Have you applied for new credit recently? • How many and what types of credit accounts do you have? • Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home. • To improve your credit score under most models, pay your bills on time, pay down outstanding balances, and don’t take on new debt. • It's likely to take time and money to improve your score significantly. 6

7. How reliable is the credit scoring system? • Credit scoring systems enable creditors to evaluate millions of applicants consistently and impartially on many different characteristics. • To be statistically valid, credit scoring systems must be based on a big enough sample. • Although you may think such a system is arbitrary or impersonal, it can help make decisions faster, more accurately, and more impartially than individuals when it is properly designed. • And many creditors design their systems so that in marginal cases, applicants whose scores are not high enough to pass easily or are low enough to fail absolutely are referred to a credit manager who decides whether the company or lender will extend credit. • This may allow for discussion and negotiation between the credit manager and the consumer. 7

8. How reliable is the Community Empower credit scoring system? • Is your score like the FICO score? Yes, It is similar. It tracks very well within the variations of the FICO scoring product. • Is your score better? It is not a matter of being better because all scoring methodologies are so similar. The primary difference is that our model reveals the score and how it was calculated to the consumer. No other score has this “Open Architecture” approach. • How important is the score to credit improvement? It is important, since it evaluates a person’s entire credit history. But, it is not the only measure we take to determine a person’s creditworthiness. Our system routinely evaluates the person’s credit position and evaluates their credit grade (A-paper, B-paper, c-paper, etc) through an automated underwriting technology we developed. The person’s score and grade and other financial factors are analyzed to trigger tailor-made credit improvement recommendations. • How do you know your score tracks with other scoring models? We know because we have compared millions of records in actual and controlled test case comparisons. This experience nort only proves our scoring model, but allows for continuous refinement of the scoring and grading models. • I’ve seen big differences with scores from different bureaus – what’s that all about? First there are different variations of scoring models, even though they may carry the same name. Second, often, the credit line items from one bureau for an individual differ from the items on the other two bureaus. A consumer has a 78% chance of a significant line item difference on a three-bureau credit pull. 8

9. How you fit in to our automated process Client seeks Credit Counseling Counselor runs 20 Min. Interview Credit Managed Credit Worthy Client Referred To CE Administrator For tracking Client Referred To Lender & Preferred Builder Client Referred to Resolution Programs Client / CE Correct Short-term Credit Bureau Data Credit Worthy Credit Managed Client Picks Home & Lot Client referred to 1 of 4 Extended Debt Management Programs Client referred to Legal for Chp. 7 or 13 Filings, or IRS negotiations Client referred to Short-term Credit Manager, or to 1 of 2 Student Loan Programs Client finalizes Financing Credit Worthy 9

10. How You Fit:Your role can impact Consumer success rates • The time a consumer takes to become bankable varies considerably based on: • Their goals and motivation • Their current credit condition • The method chosen to resolve their issues • The Counselor has a great deal to do with the end-results Time to Bankable Typical conversion into Long-term resolution program 10

11. How You Fit:How access to CE helps you answer questions about your service • Do you have educational materials? Yes, educational and marketing materials can be obtained from your login page at Community Empower. • In addition to helping me solve my immediate problem, will you help me develop a plan for staying fiscally fit and ‘loan ready’ in the future? Yes, the loan preparedness action plan has reminders of what to avoid and is available monthly. • What are your fees? Do I have to pay anything before you can help me? Are there monthly fees? What’s the basis for the fees? You pay for a service when it is delivered and the fees are affordable. • Will I have a formal written agreement or contract with you? Yes, when one is required by the CROA and the FCRA. You will also have a contract if you choose a long term resolution program recommended by the system. • How soon can you take my case? You can make an appointment that fits your schedule. • Who regulates, oversees and/or licenses your business? Is your agency audited? We abide by federal laws such as the CROA and the FCRA. • What are the qualifications of your counselors? Are they accredited or certified? If not, how are they trained? CE is working with the NCCED to develop a new certification course. • What assurance do I have that information about me (including my address and phone number) will be kept confidential? A counselor cannot use the system unless they agree to keep customer’s data confidential. • How often can I get status reports on my accounts? Can I get access to my accounts online or by phone? As often as you like, monthly status based on the normal credit cycle is the standard. • Is a debt repayment plan my only option?Will you help me plan for payment my debts? No, it is not the only option, and the system recommendations will help you make plans. • How secure is the information I provide to you? High Security – kept in a Class 4 data center. 11

12. Rules, Guidelines, Laws and Regulations

13. What Laws Govern the Home Loan Counseling Industry?The Credit Repair Organization Act • 'Credit Repair Organizations Act‘ originally set up rules for credit repair agencies. It also applies to Home Loan Counseling. • 'Credit Repair Organizations Act‘ does not apply to: • (i) any 501(c)(3) nonprofit organization   • (ii) any creditor to the extent the creditor is assisting the consumer to restructure any debt owed by the consumer to the creditor; or • (iii) any depository institution or any Federal or State credit union or any affiliate or subsidiary of such a depository institution or credit union. • 'Credit Repair Organizations Act‘ does apply to everyone else. • The overall focus of the Act is on these major points: • A consumer cannot make misleading or false statements to a Credit Bureau • You cannot disguise the identity of a person to change their credit history • You have to fully disclose your services and fees in writing • You cannot charge the consumer until you fully complete the services • Your consumer has the right to cancel 13

14. What Laws Govern Home Loan Counseling Industry?The Fair Credit Reporting Act • FCRA establishes a framework that enables businesses to exchange information necessary for the proper functioning of the credit markets. • It also provides consumer protections in two vital areas: • Privacy, and • Accuracy • The Fair Credit Reporting Act covers more than what are conventionally termed “credit reports.” • It applies to any information collected and used for the purpose of evaluating consumers’ eligibility for products and services that they want, including: • Insurance • Employment • other non-credit consumer transactions 14

15. What Other Laws Affect Home Loan Counseling?The Fair Debt Collection Practices Act • The FDCPA prohibits abusive, deceptive and unfair debt collection practices, and it imposes certain affirmative duties on debt collectors. • Congress enacted the FDCPA in response to what it saw as an increasing incidence of consumer abuse by debt collectors. • Frequently reported tactics included: • Sending purported debtors phony legal documents threatening court action to force payment; • Harassing debtors at home and at work with multiple calls in short periods of time; • Impersonating attorneys, policemen and other authority figures; and • Threatening bodily harm or even death to either the purported debtor or his or her family. 15

16. What Rules Affect the Home Loan Counselor?The Fair Credit Billing Act • You will likely encounter this problem as a Home Loan Counselor. Has Your client been billed for merchandise they returned or never received? Did their credit card company charge them twice for the same item, or, fail to credit a payment to their account? The result can cause a consumer’s credit to be damaged. • The Fair Credit Billing Act (FCBA) law applies to "open end" credit accounts, such as • credit cards • revolving charge accounts • department store accounts. • It does not cover installment contracts - loans or extensions of credit you repay on a fixed schedule. What types of disputes are covered? • The FCBA settlement procedures apply only to disputes about "billing errors." For example: • unauthorized charges. Federal law limits your responsibility for unauthorized charges to $50; • charges that list the wrong date or amount; • charges for goods and services you didn't accept or weren't delivered as agreed; • math errors; • failure to post payments and other credits, such as returns; • failure to send bills to your current address - provided the creditor receives your change of address, in writing, at least 20 days before the billing period ends; and • charges for which you ask for an explanation or written proof of purchase along with a claimed error or request for clarification. 16

17. Credit Repair Schemes – Beware“File Segregation" • If you have filed for bankruptcy, you may be the target of a credit repair scheme called "file segregation." • In this scheme, you are promised a chance to hide unfavorable credit information by establishing a new credit identity. The problem: "File segregation" is illegal. If you use it, you could face fines or even a prison sentence. • If you have filed for bankruptcy, you may receive a letter from a credit repair company that warns you about your inability to get credit cards, personal loans, or any other types of credit for 10 years. • For a fee, the company promises to help you hide your bankruptcy and establish a new credit identity to use when you apply for credit. These companies also make pitches in classified ads, on radio and TV, and even over the Internet. • If you pay the fee and sign up for the service, you may be directed to apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). Typically, EINs — which resemble Social Security numbers — are used by businesses to report financial information to the IRS and the Social Security Administration. • After you receive your EIN, the credit repair service will tell you to use it in place of your Social Security number when you apply for credit. They’ll also tell you to use a new mailing address and some credit references. 17

18. Credit Repair Schemes – Beware“Credit Cleaning and Credit File Disputes" • The ScamEveryday, companies nationwide appeal to consumers with poor credit histories. They promise, for a fee, to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job. The truth is, they can't deliver. After you pay them hundreds or thousands of dollars in up-front fees, these companies do nothing to improve your credit report; many simply vanish with your money. • The Warning SignsIf you decide to respond to a credit repair offer, beware of companies that: • Want you to pay for credit repair services before any services are provided; • Do not tell you your legal rights and what you can do-yourself-for free; • Recommend that you not contact a credit bureau directly; • Suggest that you try to invent a "new" credit report by applying for an Employer Identification Number to use instead of your Social Security Number; or • Advise you to dispute all information in your credit report or take any action that seems illegal, such as creating a new credit identity. If you follow illegal advice and commit fraud, you may be subject to prosecution. 18

19. Correcting the Correctable - BewareCredit File Disputes • Under the FCRA, both the CRA and the organization that provided the information to the CRA, such as a bank or credit card company, have responsibilities for correcting inaccurate or incomplete information in your report. • First, tell the CRA in writing what information you believe is inaccurate. Include copies (NOT originals) of documents that support your position. • CRAs must reinvestigate the items in question--usually within 30 days--unless they consider your dispute frivolous. • After the information provider receives notice of a dispute from the CRA, it must investigate, review all relevant information provided by the CRA, and report the results to the CRA. • If the information provider finds the disputed information to be inaccurate, it must notify all nationwide CRAs so they can correct this information in your file. • If your report contains erroneous information, the CRA must correct it. • If an item is incomplete, the CRA must complete it. • If your file shows an account that belongs only to another person, the CRA must delete it. • When the reinvestigation is complete, the CRA must give you the written results and a free copy of your report if the dispute results in a change. If an item is changed or removed, the CRA cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the CRA gives you a written notice that includes the name, address, and phone number of the provider. • Also, if you request, the CRA must send notices of corrections to anyone who received your report in the past six months. 19

20. How CE helps with a case diagnosis • Performs a myriad of complex calculations for you quickly. • Compares and contrasts the pros and cons of various ‘actions’ that will give the next best step to improve financial strength and loan preparedness. • Guides the counselor through the steps to gather all the required information • Illustrates the person’s current financial position on a ‘dashboard’ • Easily helps you monitor the activity of your clients month to month • Runs the credit history through a ‘loan grade matrix’ • Applies a loan preparedness logic model to a person’s credit history and financial information • Recommends a plan of action to move the customer closer financial strength and toward loan pre-approval • Recommends a longer-term credit behavior modification plan – a resolution program when it is required for the customer’s situation 20

21. Residual Income? DebtLoad? Liquidity? Assets? High? Low? High? Short Term Resolution Low? High? Low? Long Term Resolution Quick Case Analysis:How to size up your customer’s situation There are three key indicators used to size up a person’s financial stamina and potential loan readiness: • Is there any money left over (Residual Income) at the end of the month? • How much Debt do they carry? • Do they have Liquidity? 21

22. Where does the Customer Stand? • The counselor may determine the person’s status by looking at their charts, score manager profile and loan readiness banner on the CE analysis page. • At a glance, you can see the strength or weakness of their: • Monthly residual income • Debt to income ratio • Credit Score • Available Credit 22

23. Where does the Customer Stand? • The score manager profile shows their current score and indicates their potential for score improvement over the next 12 months. Enrolling in the ScoreManager can give several benefits: • The monthly analysis offers: • Tailor-made Score improvement plan • Personalized counseling • Credit file monitoring • And an indicator of loan readinesswith your monthlyprogress. 23

24. Where does the Customer Stand? • The counselor may also determine the person’s ability to get a loan by viewing the window at the bottom of the analysis page. • The Loan Readiness window will either list some loans the person may pre-qualify for, or ask a question. • At a glance: • “Congratulations” means they have a loan they may pre-qualify for… • The question: “Do you Need…”indicates they are not yet able to pre-qualify. 24

25. Where does the Customer Stand? • The counselor may also view the person’s status by looking at their summary on the counselor administrative side of the CE system, at their CE Summary page. • The financial info box on the summary page gives you a quick view of a person’s current financial health • At a glance, you can see their: • Monthly residual income • Debt to income ratio • Credit Score • Income • Expenses • Assets 25

26. What can I learn about them? • Residual monthly income (R/I)is the difference between the person’s total income and their total expenses, or “what’s left over at the end of the month“ • Debt to Income (D/I) is the sum of the person’s monthly credit items from their credit history file divided by their monthly income. It represents how a person’s debts compare with their income. A good D/I would less than 30, themid-30’s is still a workable D/I for most loan’s given a good credithistory. • This example shows a person with a positive R/I, and a high D/I ratio. • They have too much debt for the income they make. 26

27. What can I learn from their financial information? • The credit score is a complex set of many mathematical algorithms applied to a person’s credit history • Every consumer who has paid utility bills, or used a credit card has a credit history and a score • Credit scores can vary from 350 to 850 – the higher the number the better • The Counselor collects the following from the 20 Minute Interview: • Monthly income • Monthly expenses • Total assets • This example shows a person with: • a poor credit score, • with few assets • Maybe their residual income could be put to better use? 27

28. What can a consumer learn about the Credit Score? 28

29. What’s important to the Customer? • What are their goals? • What is their family situation (married with children, single, widowed)? • What financial pressures do they face? • What decisions must they make in a short period of time? • What are their aspirations? • What do they want to gain or build? • What do they fear or want to avoid? 29

30. Central Pressure Point? Action Plan Analysis? Increase Residual Income? Lower the Debt Load? Urgency? Liens or other current pay backs? Other Real Assets? Other Legal Factors? Use Liquidity? Choose Resolution Recommending their Next Step:How to use the we recommend programs for your customer’s situation Determine the answers to these key factors to choose the most appropriate program for the customer’s goals. • Start with their Central Pressure Point 30

31. Action Plan Analysis? Lower the Debt Load? Central Pressure Point? Increase Residual Income? Urgency ? Recommending their Next Step:How to use the we recommend programs for your customer’s situation Guidepost Questions… Remember, the process may be iterative and non-linear • Self Improvement • Purchase Car or Home • Deal with bills, collectors • 45 days late on mortgage • Small asset repossession • Home repossession or foreclosure • Threatened with Law Suit? • Law Suit filed? • Family expanding • Annoying phone calls • Who is knocking on the door? • Papers served? • Impending Law Suit? • Is this a “crisis” intervention or is this a moderate “concern” situation? • Cost of the action item • The ‘top’ negative factor • Drilldown listing of derogatory • Review and explanation of line items as appropriate • Can you Buy or Earn your way out? • Have time to Save your way out? • Upcoming Bonus? • Part-time Job possibility? • Upcoming Tax refund? • Other income sources or receivables? • Decrease your expenses! • No errors? • Ability to reduce card usage levels? • Watch for secured –vs.- unsecured debt • Do not miss child support • Decrease your expenses! • Liability trap of co-debtor? 31

32. Liens or other current pay back plans? Use Liquidity? Other Real Assets ? Other Legal Factors? Choose to enroll? Recommending their Next Step:How to use the we recommend programs for your customer’s situation Continuing… • Will this only slow the process –or- eliminate the problem? • Motivated to pay down other debt? • Apply Liquid assets to derogatories? • Adequate reserve given whole situation? • Their degree of ‘upside-down’ and the time-deadline will drive liquidation • Furniture / Stereo • Car(s), Boat(s)? • Homes(?) • Land (Parcels ?) • 401K / IRA • Annuities • Life Insurance policy • Probe for other liens or debts • Pay close attention to secured debts • Any current collection payback plans? • Wage Garnishment? • Public record judgments? • Timing and amount of judgment? • Timing of bankruptcy(file date, court date, dismissal, discharge dates? • Other factors – Divorce? Tax penalties or crimes? • Program description window • Best time for CE to call them? 32

33. What does all this mean? • Your credit worthiness directly affects your quality of life! • Timing can mean everything! • People who are credit worthy (read: “Loan Ready”) have higher credit scores, lower D/I ratios, some assets saved away, and a positive residual income. • Credit worthy people pay less for many types of insurance, particularly auto and home insurance. • 9 out of 10 insurers are using a person’s credit data in their policy decisions (Conning & Co. report) • Bad credit makes a poor financial condition worse: • It increases the cost of living for utilities and insurance • It reduces a person’s financial flexibility • It eliminates “leverage to wealth” factor --- A Home! 33

34. What Principles Should I Follow to Achieve my Goal? Since your credit worthiness directly affects your quality of life, you should… • Make a plan -- List your goals, define your essential expenditures and find someone to hold you accountable to your plan. • Most people never planned to stop paying a bill……its just that real life happened to them at a moment when they had no buffer… • Monitor your credit health – those who understand it can get ahead • Be a Student of Yourself – examine the negatives shown on the action plan and determine how they happened – avoid mistakes in the future • Be a learner – review and accentuate the positives from your action plan • Shift your perspective – go longer term; view things with the end in mind • Bad spending habits exacerbate a poor financial condition: • Reverse it - ?Champion Consumer – or are you spending on an appreciating item? • Reverse it – Never trade an unsecured debt for a secured debt! • Reverse it – Choose to live with a buffer – it gives flexibility • Reverse it – Live by a budget, it gives you freedom, purpose and lowers anxiety 34

35. What Do You Mean – “A Longer Term Perspective?” Since your credit worthiness directly affects your quality of life, you should… • Spend wisely and save more money. Unlike many other things in life, this means you do have to ‘sweat the details.’ • Most people never planned to have little savings……its just that real life happened to them each day, and it distracted them from a good principle: ‘regularly save some of your income.’ • Make a plan and stick to it – those who are diligent can get ahead • One dollar saved a day can grow into $46,430 in just 30 years at 10%. • Think about it… $100 saved a month can become $154,770 in 30 years at 10% • Are we forfeiting our wealth by wasting a few dollars each day?? 35

36. What Do You Mean – “Am I forfeiting my wealth?” Since your credit worthiness directly affects your quality of life, you should… • Spend wisely – pennies add up to dimes add up to dollars that can accumulate into tens of thousands of dollars. • Do not get distracted them from a good principle: ‘Regularly save some of your income.’ • Plan your Work and Work your Plan. The value of savings multiplies over time. • Think about it… examine the impact of a few dollars and slight changes in an interest rate……It is real money! 36