Are the loans collateralized?
Yes. The absolute maximum amount of each loan is 75% of the value to the collateralized property. This is a good way of assuring that the borrower realizes psychologically that the responsibility of debt is a serious issue. A foreclosure process would only be an extreme final option in the case of gross negligence— not making any payments whatsoever for over a year. Initiating legal proceeding with a particular borrower is a decision of the cooperatives, not of Pajebal. Very few loans are close to as high as that 75%, and thus we have sufficient cushion for changes in home and land prices. Pajebal and the cooperatives ascribe to a more old school banking philosophy in which we take a conservative approach to lending-amount thresholds. Furthermore, before extending a loan, we first get to personally know our customers, and we work one-on-one with them in both times of prosperity, and times of hardship.
