Lending

CU Embraces 'Make Sense' Approach to Lending

June 23, 2010
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CU Mag: What are some early signs that a member might be heading toward financial difficulties?

Wermund: Payroll deposits stop or there are bounced checks or overdraft charges. Also, denial and refusal to communicate.

CU Mag: At what point do you contact members who show signs of financial problems?

Wermund: We send notices after 16 days, followed by phone calls. Around 45 days, the borrower usually has received a letter soliciting multiple solutions and giving them my name and number to call at the credit union.

CU Mag: How receptive are members when you approach them?

Wermund: Depending on the circumstances, the key is getting the message to them that we’re their friend even though the outcome may not always be the best.

We overcome members’ reluctance to talk to us by making continued efforts to make contact all through the process. If they see we are urgent about helping them, they are more willing to communicate.

CU Mag: How has Janesville changed since GM first started to downsize its operations there?

Wermund: Employment numbers are still very grim. Many residents have taken transfers. It will take time for the community to back-fill the loss of jobs that resulted from the plant closure.

But in the long run, the community will probably come back stronger and not so dependent on one employer.

CU Mag: What have you learned from your efforts?

Wermund: I’ve learned that you have to make the best out of whatever circumstances you are faced with rather than wringing your hands. Denial kills and paralyzes.

I have worked with this philosophy my entire career. I still remember a boss who told me many years ago, “Work your programs all month long on a daily basis and the magic [the results] will be there at month end.”

CU Mag: What advice do you offer other CUs that are in the same boat?

Wermund: Assign someone to be responsible for loss mitigation. It’s a fact of life in the current economy. Denying the need to put manpower to it will cost more in the long run.

The person handling this has to know what he or she is doing, and be a problem solver and innovative thinker. Solutions may sometimes have to be off the wall but temporary. Analyze whether each [problem loan] is an ability problem or attitude problem.

CU Mag: Anything else you’d like to add?

Wermund: I noted some changes in Fannie Mae’s underwriting policies for prior foreclosure, deed in lieu, and pre-foreclosure sale credit issues. It seems underwriting is starting to slowly soften, which usually is an indicator that we’ve turned or are turning the corner.

If we can buy a little time with these accounts, we will hopefully be able to save them.

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