When someone losses their job it is usually a pretty traumatic experience. Not only is it tough emotionally, but the financial ramifications go far beyond the loss of income for day to day living expenses. Without a job it becomes nearly impossible to keep up with mortgage payments – which is why foreclosure is such a common side effect of being laid off. One bank in the Midwest, Fifth Third Bank, is taking a unique approach to help customers avoid foreclosure by thinking outside the box.
In general, while many aid programs do hard work day in and day out to make life better for individuals around the world; these efforts often fall short of really solving any meaningful problems. Many attempts to better the world do help people in the short term and makes those who provide the aid feel good, but often the situation returns to the status quo once aid workers leave, money runs out, or some other pressing issue becomes the popular problem to address. The federal foreclosure aid program of 2011 is an example of this. The program essentially gave forgivable loans to individuals in danger of foreclosing on their house. While the program did most likely produce some sustainable relief where individuals could use the loan to give them some time to find a new job, there were probably just as many or more cases of individuals who took the loan and at the end of the loan period still had no job and still faced foreclosure. Programs like this have limited success because they do not focus on solving the root of a problem but rather focus on temporary “Band-Aid” solutions.
That is what is so exciting about the foreclosure relief program that Fifth Third Bank is providing its customers. The program goes beyond even the root cause of foreclosures to the root cause of prolonged unemployment. Many of the individuals who have lost jobs over the past few years are not poor employees. They are often career workers who happen to work in an industry or with a company who was hit hard by the recession. Many were individuals who have not been unemployed, and therefore looking for a job, in years – if ever. Many do not know how to even begin the process of preparing themselves for a job search, which further continues their prolonged unemployment. If laid off workers do not know how to present themselves to and find new jobs, then they will be overlooked by open positions, even ones that are perfect for them. Fifth Third Bank’s program provides webinars, individual coaching, and online lessons to prepare customers to find a new career. They partnered with “It’s A Wonderful Life” and NextJob to better provide these resources to customers. Through this training individuals are taught how to find jobs and better prepare them for a job in a new industry. This delivers individuals the resources and support needed for the tough process of finding a new job.
You may be asking yourself – how does this make business sense, or cents, for Fifth Third Bank? There must be a cost for providing these services free to customers. There is – the program costs around $1,500 per customer. This may seem like a hefty amount of money to “give away” to customers until you realize the substantial costs that hit banks when their customers foreclose on their homes. In this Midwest area Fifth Third Bank estimated that it can lose anywhere from $40-$60k on a foreclosure. $1,500 to save $40,000-$60,000 seems like a pretty good deal if the program works. It turns out it works pretty well. In a trial period almost half (11/28) of participants found new jobs and completely avoided foreclosure proceedings. This is an estimated savings of over $530,000 for Fifth Third Bank and helped several families stay in their homes.
Overall this is a win-win for everyone involved. It helps save the bank money, provides necessary skills to the workforce for society, helps individuals avoid foreclosure, and it even helps give the banking industry a bit of a better image. It is good to see a company thinking outside the box to come up with a mutually beneficial solution to a problem that first and foremost helps customers.
USA Today, 2011; AOLjobs.com
Financially Stephen grew up in a family that preached saving and living below your means. That, in part, translated to his interest in Economics, especially how economics can affect individuals’ financial lives. Through his financial markets class in the fall of 2011, he furthered this interest by analyzing macroeconomic events. Stephen believes that finance, personal finance in particular, is a subject severely left out when it comes to public schooling in this country, and it is a problem that has manifested itself and contributed to many of the problems seen today. He also believes that education is the key to improvement and hopes that through his writings he will be able help people learn about finance, macroeconomics, and how to be financially savvy for the future.
In his free time Stephen enjoys playing and watching sports, wakeboarding, sailing, and country music. At UNC he has participated in Strive for College, UNC Dance Marathon, and UNC Relay for Life.