Credit Basics

Phones ringing off the hook are good for some businesses, but they signal economic trouble to Consolidated Credit Counseling Services.

Founder Howard Dvorkin said the volume of calls for help is up about 50 percent over the past year - to about 1,500 a day.

"We've never seen a higher volume ever in our history."

Rising interest rates, the doubling of minimum payments on credit cards, higher energy prices and consumer sentiment are all factors, he said. "I think people are looking at the economy and saying it's not so great."

He said the Fort Lauderdale-based non profit, with about $1.5 billion under management, is the nation's fifth-largest consumer credit counseling service.

Still ahead is the effect of balloon mortgage refinancings and interest-only mortgages going to market rates, he said. "What's going to happen is those people who took a mortgage at 4 and 4.5 percent are going to find the rates are more at 7 percent and 7.5 percent - and that's going to crush a lot of people."

The unfolding of condominium inventory is just starting, he said. "As more units come on the market, it's going to get saturated. It's not bad now, but it's going to get bad."

He sees a foreshadowing of the trend in TV ads by condo converters. A year ago, they had buyers lined up, he pointed out.

"They rode that donkey, and now the donkey dropped."

Dvorkin, who is also a CPA and private real estate investor, knows how bad it can get because he did consulting work for the Resolution Trust Corp., the agency created in 1989 to clean up the savings & loan mess.

Consumers have gotten used to tapping the equity of their homes in recent years and the nation slipped into a negative savings rate, he said. "That should have sent shockwaves through this country."

Home equity has served as a piggy bank, but some consumers could find themselves tapped out if home prices drop.

"At high price, they have leverage," he said. "At lower price, they will give up the house because it's not worth holding on to."