Ka Wai Ola - Office of Hawaiian Affairs, Volume 11, Number 6, 1 June 1994 — OHA hires specialist to handle delinquent loans [ARTICLE+ILLUSTRATION]

OHA hires specialist to handle delinquent loans

bv Patrick Johnston An inevitable fact of loaning money to businesses is that some don't pay it back. Reasons vary: Some get caught in a downswing in the economy; a few are just irresponsible; many, for various reasons, just quit. OHA's Native Hawaiian Loan Fund manager Ken Sato explains that it is vital to take care of bad loans. "Monitoring delinquent loans is an impor-

tant part of keeping I lending operations such I as the Native Hawaiian I Revolving Loan Fund I healthy. One of the I principal ideas behind a I revolving fund is that I the money is repaid to I the fund whieh ean then I be used to finance other I businesses." If you lend your money to people who don't pay it back it

makes it harder to loan money to people who will. Also. having a lot of bad loans on the books hurts the loan fund's standing in the eyes of support agencies and makes it harder to get funds to keep it operating and expanding. In the past OHA relied largely on its loan fund officers to handle delinquent loans. Mostly this involved staff calling recipients and trying to fix the problem after their loan had gone more than 30 days with no payment. Often this would involve restructuring the loan to make monthly payments smaller.

Officers were effective with less problematic loans but more serious delinquents demanded more attention than they were able to provide. To look specifically into these problem loans, this year OHA hired a "loan adjustment specialist." Gerald Honda. who has 18 years experience in the credit field, is responsible for contacting loan fund businesses that are severely delinquent, informing them of OHA's concerns, and trying to resolve the problem. "Accounts over 90 days delinquent are usually

referred to me," says Honda. "I make calls, and send letters. ... We initially try to work things out in house." If there is no response on the part of the client, Honda will ask OHA attorneys to get involved. "We take a tough line," Honda explains. "When a client gets a letter from a law firm they tend to take more notice. We have gotten responses from clients who have not responded for several months." Honda believes most of the delinquent loan fund recipients are sincere about taking care of the loan. "Most of the people we're dealing with are really honest. They want to pay. We work with them as mueh as possible."

Despite a screening process that rejects 90 percent of the applicants, as of March 31, 1994, the rate of NHRLF loans delinquent more than 30 days was 28 percent. This compares to a regular commercial bank's rate of below 3 percent. The rate reflects the high-risk nature of the loan requests - they must be rejected twice by commereial lenders before they ean be considered for an OHA loan. Keeping the rate down is important for continued federal support of the program. Funding for the first three years of the loan fund - from 1989 to 1992 - eame from the Administration for Native Americans. In 1992, the program was reauthorized, with $1 million coming from ANA and $1 million in matching funds from OHA.

■ »■ i ■ i. i ii i» .i ii ■ n* i Gerald Honda