Credit Counselor: Counseling Puts B&C Borrowers into Prime Quality Loans.(Brief Article)(Statistical Data Included)

Lending to a borrower with a poor credit history is always a risky business, and the risk is obvious. These borrowers are more likely to go delinquent and subsequently default on their loan than "conforming" borrowers.

While the traditional approach to shield against risk has always been to originate the loan at a higher interest rate, there is also a new trend emerging - extensive counseling and originating a conventional loan.

In March, Freddie Mac announced such a program, partnering with Wells Fargo Home Mortgage, Sovereign Bank and Consumer Credit Counseling Services of southern New England to launch a new $25 million statewide effort called Home to Rhode Island.

It is part of a three-year, $100 million homeownership and home preservation initiative in New England that will also include Connecticut, Massachusetts and New Hampshire.

Special initiatives are being crafted for each state that will combine in depth pre- and post-purchase counseling for prospective borrowers through the region's 35 CCCS offices, with low-cost mortgages from Wells Fargo Home Mortgage and Sovereign Bank.

Freddie Mac expects to invest $25 million in mortgages made under the Home to Rhode Island initiative.

Craig Nickerson, vice president of community development lending at Freddie Mac, said the Home to Rhode Island initiative is part of the agency's CreditWorks program, which was launched exclusively with the National Foundation of Credit Counseling chapters, typically known as that of CCCS.