RALEIGH, N.C. — Bad economic conditions statewide are leaving more members here vulnerable to foreclosure, but State Employees' Credit Union is taking action to keep them in their homes with its new Mortgage Assistance Program.
SECU's foreclosures and delinquencies, while still very low, are higher than they were in the last few years and that prompted action on the part of the credit union.
Rising Unemployment Is the Problem
"It's not indicative of poorly originated loans, it is not a matter of having made loans to borrowers who were unqualified," SVP Phil Greer said of the rising delinquencies and defaults. "We've found that the rising rate of unemployment in North Carolina, which is now in the neighborhood of 10%, is having an effect on our members. Many of our members have lost their jobs, their spouses have lost their jobs, they've had their hours reduced, whatever the case may be. These are good people, they just find themselves in the unfortunate position of having reduced income and not being able to make the payments they'd like to make."
So SECU has radically changed its collections technique by eschewing the traditional letters and phone calls and instead getting staff members to meet with members one on one to discuss their financial situations. Whether it's at the branch or at the kitchen table, members sit down with SECU employees and go through their obligations, income, future opportunities and even talk about what discretionary budget items need to be axed.
"Someone who is struggling making their mortgage payments may not need to have a $150 bill for Cablevision," Greer noted. "If they lose their homes they're going to lose their cable, too!"
Based on those discussions, the two sides agree on a plan to move forward which can include partial payments over a certain time period, loan extensions or a complete overhaul of the mortgage. But Greer pointed out that the credit union is not changing interest rates to an artificially low figure to keep members paying their mortgages.
"We're not modifying interest rates to special rates, we are simply modifying them down to our current rate," he said. "That current rate will give them a lower payment, and perhaps that lower payment is what is necessary to put them on solid footing."
$140M In Mortgages
More than 1,400 members with loans totaling $140 million have a new mortgage plan in place thanks to the program. The assistance program has also spawned a new product, SECURE Mortgage, which consolidates members' mortgage balance with any other outstanding loans or credit balances into a lower interest first mortgage that can be financed up to 100% of the value of the members' homes.
"It goes a step further in allowing up to $5,000 to be loaned, and considered as a collateral, that is moved into a special savings account so they have some money in the event the air conditioning breaks or the furnace breaks down," Greer continued. "If they have a bump in the road they'll have something to fall back on."
But SECU remains realistic about the program, pointing out that some members simply have no ability to begin to repay their loans now or in the near future. In those cases the credit union begins the foreclosure proceedings as soon as possible so both sides can get on with process as soon as possible.
Not many members fit in this category though, as the credit union has only a 0.9% 60-day delinquency rate and a 0.5% 90-day rate. In 2008, foreclosures represented only 0.13% of all of the institution's outstanding loans.
"All in all I think [the Mortgage Assistance Plan] has a positive impact to the credit union," Greer said. "The financial position of SECU remains quite strong."
