SAN FRANCISCO — In response to double-digit unemployment numbers in this state, Patelco CU is taking drastic measure to prevent delinquency.
"The first thing we do is contact people very, very early in the delinquency cycle and in some cases before they are delinquent," said Chris Oldag, senior vice president of lending. "If we have knowledge that the employers they work for are going out of business, we let them know before they go past due what options there are."
Depending on what services members are utilizing, the options are numerous. Patelco offers some qualified members an abeyance of up to 90 days to get themselves on better footing after a job loss. After that period expires, the credit union follows up to ensure they can start making their payments again.
But if they cannot hold fast to their previous agreement, Oldag noted, they can still have an alternate payment structure created or receive a workout loan. Members who qualify for workout loans frequently have products such as their mortgages or car loans combined with credit card balances and get the interest rate slashed far below either rate.
While it eats into the loans' profitability, the workout gives members "the ability to repay and experience principle reduction every month," Oldag pointed out, and less profitable loans are much better for the credit union than taking possession of vehicles or homes that are quickly losing value or trying to collect on credit card debt in a tough economic time.
The credit union also makes quick moves to prevent big losses for both sides and to keep inventory in the community from building up when a member simply cannot afford to stay in their homes.
"We help members with short sales with immediate decisions (banks take weeks or longer) to help get them out of an upside down home as quickly as possible," Oldag told Credit Union Journal. "They are always able to sell homes easier and for less of a loss than us usually because of the condition and appearance of occupied versus empty."
Despite its best efforts sometimes Patelco simply is not able to help out a member who has no ability to repay what he owes. In those cases the $4.3-billion credit union acknowledges the issue, takes the loss and moves on.
"There are some lenders who might use these tools to mask delinquency, but we certainly don't. We want a realistic approach," Oldag said.
And that realism has to take into account this little piece of reality: California's unemployment rate is about 2% higher than the national average of 8.1%.
