We’ve seen our loan delinquencies go down for the past three months. I’ve talked to a few of my friends at other credit unions and they have seen the same thing.
Of course, we are all asking the same question – why?
Most of us theorize that it is because of tax returns. People are getting their tax refunds and paying down their debt with the money.
Some people in the industry think this is not a good sign. They worry that once the refunds are spent, our delinquencies will go back up again.
I, however, think it is a very good sign. I think it’s a positive sign because it signals that credit union members WANT to make good on their obligations.
I’ve had my fill of people going on the news and bragging about their “strategic foreclosures” (the practice of defaulting when you can pay). This type of mentality seems to be contagious. Studies have shown that you are more likely to foreclose on your home if your neighbor has.
So if credit union members use their tax refund to fulfill their promise of payment, it means that they have good intentions. As a lender, it’s far easier to deal with someone who wants to make their monthly payments but can’t than it is to deal with someone who can make their monthly payments but won’t.
I see the recent decline in delinquencies as an indication that our membership is made up of the former.
That or the recession is finally over!
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