Staggering Amount on Defaults
Lenders need to be aware of the risks when distributing money and avoid making loans that could simply lead to a whirlpool of debt for borrowers who cannot make timely payments. A recent audit in the city of Portland examined the strength of the city’s housing loan programs.
The Portland Housing Bureau (PHB), the subject of the audit, was seen to offer different kinds of financial aids for those interested in loans to finance the construction of affordable housing, whether they be for single or multi family homes, rental or purchase.
Of all the findings of the audit, one of the most alarming pieces of information is the prediction that around 85 percent of the loans made by the PHB will go unpaid, since only about 15 of borrowers are expected to make payments successfully. In this case, the payments can’t actually be made because they are used for special housing projects, as the Oregonian noted.
In the introduction to the report on this audit, auditor LaVonne Griffin-Valade explained the source of some of the repayment problems that the government witnessed.
“Because PHB had not defined outcome measures or cost parameters, it was not clear whether these projects were the most cost effective,” Griffin-Valade wrote. “In addition, in many cases PHB used loan products with minimal repayment requirements.”
The Oregonian also found that this reflects the current PHB Commissioner, Dan Saltzman, and his general approach to freeing up more housing. Saltzman has been in his position for less than a year, the source reports.
By using credit risk assessment software, your business can strive toward better loans that will be more likely to be repaid and avoid the problems that are plaguing Portland today.