DALLAS-One way to avoid being burned by the "Walkaway Phenomenon" is to be proactive before it gets to the point of no return.
That is the message from Curtis Cole, mortgage servicing manager for American Airlines CU. Cole also sits on the board for ACUMA and is president of the Texas CUREN, an organization of credit union lending professionals that specializes in real estate loans.
"In the credit union world," he said, "strategic defaults are not very prevalent. Even on short sales where the credit union has a home equity loan, we are still getting something-perhaps $3,000 or $5,000."
Credit unions simply are doing a better job than banks at recognizing borrowers who are falling behind, Cole continued. He said CUs excel at contacting these people before the situation becomes so hopeless underwater borrowers feel walking away is their only option.
"We talk with homeowners that fall behind and try to work with them, perhaps suggesting a short sale," he said. "For the most part, members want to keep their financial relationship with their credit union and once they realize we are willing to work with them, that opens up other options."
At American Airlines CU, Cole said if a short sale cannot be arranged with the borrower in a reasonable amount of time, the credit union does a deed in lieu of foreclosure. The borrower signs the deed and turns the house back over to the credit union without incurring the cost or time of foreclosure. Most credit unions that receive deeds in lieu do not go after deficiency balances and do not report it as a foreclosure to credit agencies, he said.
"With credit unions, if someone falls behind they can always get a person on the phone to discuss their situation. If the person has a mortgage with one of the big boys-Wells Fargo, Countrywide or Bank of America-they usually can't even get someone on the phone."
