by Nancy Osborne, COO of ERATE®
(4/30/2013) Sounds simple and patently obvious but all too often the simple and obvious are overlooked. Yet one smart CEO who was thinking outside the box figured out that the best way to help the banks deal with the mounting foreclosure problem was by helping their delinquent borrowers find jobs so they could in fact stay current with their mortgage payments.
This should be viewed as the ultimate win-win situation!
Banks typically spend on average $40,000 to $60,000 to foreclose on a single property secured by a delinquent mortgage, yet it only costs about $1,500 to provide career counseling and 4 months of employment search assistance to that very same delinquent borrower. When the CEO of an Oregon based Employment Company proposed his novel approach to the loss mitigation department of Fifth Third Bank, much to their credit, they were smart enough to take him up on the proposal and launched a pilot program around the concept.
The program kicked off at the start of 2012, achieving surprisingly good results. Within six months nearly 40% of the bank's delinquent borrowers in the program were gainfully employed. One noteworthy metric is that many of the delinquent borrowers participating in the program had been out of work for almost 2 years and were considered a part of the long term unemployed.
This unconventional yet successful approach has warranted the attention of a number of banks and is now expanding throughout the country. As the number of distressed loans has recently dipped below the 5 million mark for the first time in five years, there is finally some good news for homeowners. The real estate market appears to be on the mend and the bank's ability to deal more effectively with their distressed borrowers will only serve to improve the market even more quickly.
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