Bank helping unemployed homeowners find work

Employment counseling cheaper than foreclosing on delinquent borrowers

Steve Bergsman
Inman News®

The concept seems so simple it’s a wonder no one thought of it before. Even for the guy who conceived the program, it was an odd revelation.

He was exercising on an elliptical machine, watching a Senate Banking Committee hearing on television when the idea occurred to him.

The hearing focused on the frustrations involved with the loan modification process. The problem was, people were losing homes because they had lost their jobs and could no longer pay their mortgages. Not even a mortgage modification was going to help these homeowners. If they couldn’t find work, their homes would go back to the banks.

As much as people think otherwise, banks don’t want to push a loan into default. It’s too expensive. On average, it costs a bank $40,000 to $60,000 to foreclose on a mortgage.

While on that elliptical, John Courtney, CEO of NextJob Inc., a Bend, Ore.-based employment firm, thought to himself: What if banks could cut their losses by helping borrowers find new employment? Courtney looked around the banking industry for an innovator and decided on Cincinnati-based Fifth Third Bancorp.

"When they approached us, a bell went off," says Jon Meade, a senior vice president in loss mitigation for Fifth Third. "This seemed like such an interesting concept, I said let’s do a pilot and we’ll see if it turns out like we think it will."

He adds, "I knew the dollars and cents would add up."

Indeed, it costs about $1,500 per person for employment counseling, including 16 weeks of online job search assistance, weekly webinars, online job search software and one-on-one personalized phone career counseling, which is a lot cheaper than working through a mortgage default that can cost the bank as much as $60,000.

In the pilot program, eligible participants had to be Fifth Third customers (from anywhere in the bank’s footprint) whose loans are serviced and owned by the bank. They had to have missed two consecutive mortgage payments due to a change in employment status.

On average, the individuals in the program had been out of work for 22 months.

For the pilot program, Fifth Third was looking at customers that had experienced employment-related hardship relatively recently.

"We are not talking about customers who hadn’t paid us in three years; we were trying to get to customers in the early stages of problems," Meade explains. "We get the benefits of finding employment for clients before they are so far down they can’t get back on track. We were trying to identify early stages of delinquency."

Meade estimates that 50 percent of the people with loans going into delinquency face curtailment of income, underemployment or outright unemployment.

The pilot program went into effect in January 2012 and nearly 40 percent of the participants were fully employed after six months. Fifth Third was very satisfied with the program and decided to expand it.

"I thought our customers would be relatively pleased with the employment counseling offer," says Meade, "But, when we surveyed our customers, the results were off the charts. They couldn’t say enough about Fifth Third making this available to them, the quality of the job coaches or the interaction with the job coaches. They loved the assistance they got with job searches and with putting together a resume."

The program involved Fifth Third identifying homeowners who were at risk of foreclosure, reaching out to them with an offer of more than just modifying their mortgage, Courtney adds.

Those that seemed curious were overnighted a package explaining what NextJob is and what it hoped to accomplish. If the customer wanted to continue there was, in banking lingo, a referral to action. The percentage who responded positively to the package was as low as 7 percent a month and as high as 14 percent a month.

If the homeowner showed interest, a connection was made to NextJob, which assigned a one-on-one coach going forward. The counseling was free and not mandatory.

"Coaching involved motivation, education and connection," says Courtney. "Motivation is important in most cases because homeowners who are in default often have been unemployed for some time. When you face long-term unemployment you often face depression and struggle to have hope that there are jobs available or that you can land any of those jobs"

The first job of the counselor then is to instill hope. That involves giving job seekers facts about the job market, and strategies that can work.

For example, one of the most important things for a job seeker to understand is that half the jobs that are open are not publicly posted. If, as a job seeker, you just apply to the jobs that are visible or advertised and you get to the end of those, you think you are done, that there are no more opportunities.

In fact, through networking and effective cold calling, job seekers can open the door to another 50 percent of all the jobs.

Fifth Third’s employment counseling program has attracted the attention of other banks. The bank has made presentations to the industry and Meade makes it clear he would like to see other banks do something similar, just because it is a good idea.

The media has also discovered the program, and that has given the bank a lot of good publicity, which Meade says will improve the percentage of customers who opt for counseling.

"Bank customers are often surprised that a bank would do this for them," says Courtney. "They are very thankful and encouraged to have someone who can help them break through what has been a dead end job search."

The key takeaway: people who are employed pay their bills.

"Once customers find employment, they become current on their mortgage very quickly," says Meade. "We are very pleased with the outcome and that’s why we are expanding it. I’m hoping for more success stories."

Steve Bergsman is a freelance writer in Arizona and author of several books. His latest book, "The Death of Johnny Ace," is now available for sale on Amazon.

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