By Ray Birch
HOUSTON—The biggest issue facing members in Houston, says one CU CEO, are those who are also literally under water on a loan for a car totaled by Hurricane Harvey for whom the insurance check won’t come close to paying off the balance.
“We are seeing this situation from our members and I am hearing this from other credit union CEOs in Houston,” said Malcolm René, CEO of the $55-million Houston Metropolitan FCU. “Even GAP coverage is not even helping at times.”
Sharply increasing negative equity in cars has been an issue CUToday.info has extensively reported on, and when storms like Harvey and Irma strike, the problem is magnified, René said.
“So what do you do? Not help that member who just lost his car and is way upside down?” asked René late last week. “We are addressing this case by case. Since we reopened on the Wednesday following Harvey’s landfall here, we have preapproved about 60 members for new auto loans and no negative equity has stopped a deal. We tell them they are preapproved and to go out and shop.”
Slow Settlements
Another problem facing vehicle owners post-Harvey is slow insurance settlements.
“Adjusters are backlogged, but our members are coming to us and saying they don’t want to pay any more on that old loan for the car that’s totaled,” René explained. “They don’t want to have side-by-side car loans.”
Many had been paying their car loan through payroll deduction, said René.
“So how do you address members who are adamant about not wanting any of their money going to that old car loan?” said René. “Following proof of insurance, we take that old loan off payroll deduction and extend that loan 60 days—essentially putting that loan to sleep—and immediately focus on the new loan to get that person whole.”
René said that he sees the struggle in the faces of members as they try to get back so some sense of normalcy.
“That first day we reopened you could see the look of total shock on members’ faces as they walked into our branches. We had a skeleton crew back that first day but we found ways to get extra staff into our lobbies to talk with members, see what type of ordeal they had been through, if they had suffered loss and what we could do. We were also there to give them a hug and let them know the credit union is there for them,” said René, who lauded the efforts of his team to get back to work despite facing hardships of their own.
Lots Of Cars In Houston
The type and level of members’ loss “has run the gamut,” René said. However, totaled cars from flooding has represented the largest dollar loss category, the CEO estimated. “There are a lot of cars in Houston, as Texans like to make their own way and don’t use public transportation much.
“The next greatest level of loss are homes that were damaged by rain, but not submerged. We had a 48-hour period where we had torrential rain. Roofs are made to be water resistant but are not waterproof. This rain was like having buckets and buckets of water constantly poured on your roof for two days,” said René. “At some point something has to give. We have seen a lot of roof failures just from the rain alone. Members are walking in telling us their entire living room and dining room ceilings have fallen in.”
The third level of loss the credit union is seeing, said René, is from homes with two to eight feet of water in them.
“The large majority of members we have talked to whose homes have suffered flood damage told us they do not have flood insurance,” said René.
The CEO acknowledges that this could become an issue for lenders, if damage is extensive and members simply walk away from their home, a problem CUToday.info reported on here. René said Houston Metropolitan is working with members individually.
Personal Assistance
He explained that when the credit union learns of members who have significant flood damage to their home and are without flood insurance, they are quickly connected with the credit union’s loan manager or EVP to discuss ways the credit union can help.
“Because each case is so different . . . we can’t just pull a product off the shelf and tell members this is what we are going to do to help,” said René. “What we are doing is listening carefully and being as flexible as possible.”
That might lead to a 60- or 90-day loan extension, or possibly longer if the member has a legitimate FEMA claim, René said.
Overall, Houston Metropolitan is offering members a disaster personal loan that comes with flexible underwriting. The CU, too, is bumping up members one credit tier.
“Say they have C credit, they now are now a B, so they can get a better rate,” René said.
The credit union is also kicking in $300 on each car replacement loan that can be used however the borrower decides.
A skip-a pay-has program has also been activated. With two of the credit union’s largest SEG groups, Houston Metropolitan automatically instituted skip-a-pay for each of those members.
“They don’t even have to come into the credit union to take advantage of it, the program is already in place for them,” said René. “We went straight to the HR departments of these two SEG groups and they are informing our members for us, which we think is most effective.”
Reaching Out To Members
The credit union is also being proactive by searching for members they believe could be the hardest hit by the flooding.
“We are overlaying a map of the flooding in Houston with a map of our membership,” said René last week. “We are starting to reach out to members we feel have been impacted by the flooding and asking if there is anything we can do for them.”
But what the CU can do most now, said René, is listen.
“I have impressed upon my staff to be poised to listen to our members—now more than ever. Not listen just to determine the products we have on the shelf to deliver relief, but to listen and look deeper for possible needs and find ways to make adjustments. We are being extremely fluid with what we are doing.”