Lending

CU Embraces 'Make Sense' Approach to Lending

June 23, 2010
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CU Mag: How has your approach to helping members with problem mortgages changed over the years?

Wermund: You have to understand that some people may just continually pay slow and not manage their lives well. There are others who have just come across some bad circumstances.

I’ve always believed there are only two reasons people don’t pay: ability and attitude. Most times we can do nothing about the ability. But by reaching out with a helping hand, sometimes we can change the attitude. Doing that with “make sense” terms can produce a win-win conclusion.

CU Mag: How do you change a member’s attitude?

Wermund: Sometimes it’s a matter of reaching out and conveying that we want to help them, but we need help from them—they need to return our phone calls and maybe give us some documentation to let us assess the situation.

Then there are people who still don’t change and you have to take the vinegar approach, maybe starting a lawsuit to show we won’t just go away. Then, even after the papers are served, members have come back and said, “I guess you mend business. Let’s talk.” And we can work it out.

CU Mag: What’s your approach to mitigating mortgage losses?

Wermund: Obviously, Fannie Mae dictates a lot of what we can do on their loans. With loans held in portfolio, it goes back to the “make sense” approach. You have to look at loss potential, ability, and history, and consider whether time will heal the situation or make the matter worse.

CU Mag: How do you help members avoid foreclosure?

Wermund: We try to make early contact and convey the idea that we’re here to help. We gather facts and suggest solutions.

CU Mag: How many members do you work with in a typical month?

Wermund: That’s hard to put a number on because there are so many accounts that are ongoing problems. We probably get five to 10 new accounts each month, but we currently have about 50 ongoing foreclosures that get regular follow-up.

Our modification crew runs about 35 to 40 pending applications and 15 to 20 trial programs. Compared to the industry, which has completed maybe 12% to 18% of their modification applications, we’ve completed more than 40% of our applications.

We’ve helped upwards of 150 to 200 members since implementing the loss mitigation department.

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