SAN JOSE, Calif. — Credit unions across the country are taking aggressive steps to keep members in their homes and cut down on delinquencies that have pushed many a bottom line into the red.
Meriwest CU is rushing a new "hardship assistance team" into place to help members modify loans of all shapes and sizes into packages that are more manageable. As foreclosures soar in California, local media has made a strong effort to inform people that they need to get in touch with their lenders if they are starting to miss payments; many members have approached the credit union before they get phone calls said VP-Loan Administration Anita Domondon. "The primary thing we are doing with home loan mods is reducing the interest rate. We are trying to get it down to 38% of their income," she said. "In some cases we have taken their payments down to a number that is comparable to what they would have had to pay for rent. Our primary goals are to keep them in the house and help them any way they can."
California was one of the first parts of the nation to experience the foreclosure epidemic. But the people walking away from their homes today are very different as unemployment is leading to foreclosure instead of dropping home values or family disruptions. The rise in unemployment is not limited to the more vulnerable parts of the economy either.
"We are seeing unemployment and a reduction of income across the board," Domondon noted. "A year ago it was construction and automobiles, now it's in high tech and retail."
Members have strong incentive to ask for help from Meriwest as the modifications, no matter if it is a refinance or an alternative payment plan, do not affect their credit scores as long as they stick to the new requirements.
"We're not charging any fees to our members-nobody is getting charged anything. They are in a hardship situation already, we don't want to make that worse," Domondon explained.
Meriwest is making every effort to be proactive in addressing members' financial problems. Collections Manager Julie Jaquith noted CU representatives are offering entry into the assistance program in every delinquency call. Staffers are also looking for different member behavior such as smaller deposits and a change in where their cash flow is coming. "If a person does come in with an unemployment or disability check, regardless if there is a delinquency or not, we offer the assistance package," she said.
Boeing Employees Credit Union is also being aggressive in heading off foreclosures and defaults, while still maintaining a sober enough attitude that modifications will not work in every case. "We're looking at re-doing loans where they have willingness and ability to pay. We're doing whatever we can to make a new loan and keep them in the homes," said Aaron Bresko, Director of Credit and Portfolio Management. "[But] if we think the loan is going to go bad, modifying the loan for three months isn't going to help it so we'll continue down the collection path."
According to Bresko modification and refinance activity is significantly up at BECU and the institution is looking for even more volume as it has highly publicized its assistance program. The $8.7-billion behemoth has brought in six new employees with experience in helping distressed members as it steps up its efforts to educate its nearly 600,000 members that the credit union there to help.
"The hope was that folks would contact us before it is too late so we can identify solutions and that has gone over really well," said Bresko.
Valley Credit Union, also in San Jose, is also offering loan modifications but is taking a number of steps to ensure that its assistance will do more than delay an inevitable default. Collections Manager Hector Espinoza said Valley, a division of Citizens Equity First Credit Union, sends members to consultants to put together a financial plan before getting approval for a workout.
"Each case is different so we review them on a case by case basis," Espinoza explained. "If they are willing to cut some of their lifestyles, manage their budgets, and they have an interest in keeping the properties from the long term, we offer a modification."
Valley CU and its parent company CEFCU hold weekly staff meetings evaluating the risk in their real estate portfolio. Collections keeps track of members that are delinquent on their taxes, that are no longer paying insurance, discontinuing direct deposit or are losing points on their credit scores.
Valley also reserves for loan loss on modifications to avoid nasty surprises down the road. But the CU tends to eschew making changes to auto loans or unsecured lines of credit. "In the past those types of modifications are delaying the inevitable because they usually go bad and we don't want to hide our losses," Espinoza explained.
