The idea of using community service or volunteerism in exchange for debt forgiveness is still a very new concept, so much so that it's rarely used. While we're trying hard at Raise the Roof to bring this concept to life with defaulted second mortgages, the question has been asked more than once: Is it still volunteering when you're eliminating debt for your actions? Yes, and here's why.
Using the Raise the Roof model as an example, the volunteer work that is performed is done for a nonprofit organization in the community, not the entity that owns the loan being forgiven. The service benefits people who are in no way connected to the debt and are folks that in most cases don't even know that the volunteer is working off a defaulted second mortgage.
The entire concept of exchanging community service for defaulted second mortgage debt is simply meant to provide an alternative form of currency for the struggling American homeowner. Identifying those homeowners who fit the criteria of "low capacity, high willingness" borrowers is easily achieved with sophisticated software and ensures that strategic defaulters are not invited to participate. This model is designed for the millions of homeowners who would make their payments if they could make their payments.
Raise the Roof is a nonprofit whose mission is to partner with lenders and servicers of defaulted second mortgages to offer homeowners the opportunity to perform community service in exchange for the defaulted debt. The loans can stay with the lenders while Raise the Roof is offered as a third-party loss mitigation option or the loans can be also be donated to Raise the Roof. Given the statistics on underwater first mortgages, the potential for repayment on the majority of these seconds is almost zero. Eligible homeowners are offered the opportunity to perform community service projects in association with the HandsOn Network, the nation's largest volunteer network, in exchange for forgiving their second mortgage debt.
We then connect participating homeowners with their local HandsOn Network affiliate for intake and orientation sessions, and to coordinate their community service hours. Once homeowners complete their volunteer service commitments, the lender agrees to forgive the debt and notifies all three credit bureaus that they are free and clear of their second mortgage debt. This approach offers a win-win-win for homeowners, banks and communities alike.
An important part of the process is providing tools to participating homeowners to increase their financial literacy. Raise the Roof is partnered with Operation HOPE, a national nonprofit committed to providing loan modification counseling, credit counseling, household budgeting assistance and information on structuring debts and obligations.
Raise the Roof is looking for banks and servicers to participate in this cutting-edge initiative. So often we hear the need for innovative thinking to solve America's biggest problems. Well, here's an innovative idea. Now all we need is for the banks, lenders and servicers that hold these valueless mortgages to "act" innovatively with us to start to move the needle on the American mortgage crisis.
One example of how empowering and successful the "volunteering in exchange for defaulted debt" model can be is Marilyn J. Like so many South Florida homeowners, Marilyn slipped into foreclosure and ultimately sold her home in a short sale. As a senior citizen in this situation, it's likely no one would have faulted her if she walked away from the balance on the defaulted second mortgage, but she didn't. She was our first Raise the Roof participant and jumped in with both feet completing her required 100 hours of volunteer work in just over three months, a fairly aggressive pace. During that time she worked with Kids in Distress, worked at a local food bank, worked with children at an arts center, worked a fundraiser for another children's organization and volunteered at a health fair, among other projects.
"This opportunity turned my life around," Marilyn said.
She made new friends, networked for business, made a significant difference in her community and eliminated a $53,000 debt from her life forever.
Providing an opportunity to turn someone's life around is not something that's done for profit, but with an earnest effort to make a difference.
Is volunteering in exchange for debt forgiveness still volunteering? Yes it is.
Follow Richard French on Twitter: www.twitter.com/richardfrench