In regards to the ”Subprime Loans Not Dead” article that ran in the October 21, 2015 edition of your newspaper I’d like to provide some further clarification, given that without knowing the facts of the particular loan referenced your reader might jump to the conclusion that our institution is a “predatory” lender, which is far from the truth.

The emboldened section of the article lists our credit union as having issued a loan to a resident of the Riverwards during the period from 2012 through 2014 with the highest interest rate found, namely 10.42% above Prime or 13.42%.  While the rate itself is accurate, the particulars of this deal will help to clarify the logic for said rate.

In this case the member had an existing fixed rate second mortgage loan with us at a rate of 6.24%.  During the repayment period the spouse lost his/her job, their bills fell behind and their credit score declined precipitously.  In order to assist the member the credit union agreed to refinance both their existing second mortgage and an outstanding auto loan.  Given the poor credit scores and our willingness to extend the term of the loan so as to drive the monthly payment down, the rate had to be increased to offset the inherent risks.  The result being a loan with an interest rate of 13.42%, however a decline in the total monthly payments of $335.72.  Rest assured that given the member’s dire circumstances they were far more appreciative of having been able to save $335 each month versus worrying about the rate of the loan, as once back on their feet they could improve their score and refinance their loan to reduce the rate.

Note that as a member-owned not for profit cooperative the funds we lend out are the same funds being deposited by other members, so we need to be both repaid and able to pay a return on the deposit, hence the disparity in loan rate based on the related risk.  Unlike a bank we can’t issue stock to raise capital, so our capital, which allows us to provide high quality yet low cost services to our members, has been accumulated through income saved over the almost 80 years we’ve been in business serving our members.

Sincerely,

James F. McCaw
President/CEO
Viriva Community Credit Union