COLORADO SPRINGS, Colo. - When a member with a long-standing 800 FICO score, a good pension, and additional income walked into the credit union and dropped off keys to his home, Ent FCU knew it was time to focus on workout loans.
The $2.4-billion Ent created the Member Solutions Group to look more closely for signs that members are in financial trouble. And when they find members who need help, they talk to them about their situation and pursue a workout loan if necessary.
“It was January 3rd,” recalled Bill Vogeney, SVP and chief lending officer for Ent. “And from time to time we’ll have members drop off car keys and surrender the auto. But for the first time we had a member drop off keys to his home.”
It was a member whom the credit union “never suspected” was in financial trouble.
“When he turned in his keys his FICO score was still 740 and his credit card debt was not that great. Maybe $5,000 showed on the credit report,” Vogeney said.
It was a very calculated decision, Vogeney suggested, having much to do with the fact the member wanted to move to his second home and could not sell his current house.
“Home values have dropped so much here that he didn’t have any equity left in it,” Vogeney said, explaining that the member dropped off a very detailed letter explaining who to contact to transfer utilities to the credit union in time so the home’s pipes wouldn’t freeze. “He was thorough–even gave us the clicker to the garage.”
That event was all Vogeney needed to circle his staff and begin forming the Member Solutions Group that’s now writing about $750,000 a month in workout loans, Vogeney estimates. Overall, the CU has $1.8 billion in outstanding loans.
With the goal of helping members before they get too deeply in trouble, Ent reached out to all members through its monthly newsletter saying, “If you’re having financial issues, we’re here to talk.”
Asking members to speak with Member Solutions is “much kinder and gentler than talking to collections,” Vogeney suggested. Collections was renamed Member Solutions with the new workout loan focus. “It’s a lot less threatening and implies that we are not just trying to collect money. We want to come up with solutions.”
For members who might be teetering on mortgage trouble, Ent offers a podcast on its website on how to avoid foreclosure, which Vogeney believes is more appealing than a seminar. The credit union also offers a mortgage foreclosure hotline.
“We do a lot of financial education classes,” Vogeney said. “But we are not sure how likely members who are in financial difficulty will show up. They might be embarrassed, especially if they see someone they know. This way they can download the podcast and watch at home.”
Struggling to keep the home is a situation that Vogeney believes not many members want to talk about, and is a big reason why some lenders are caught off guard.
“I think a lot of lenders are finding that people are not talking to them–in time or at all. People assume nothing can be done and give up.”
Ent didn’t see many warning signs last year, especially in first mortgages. It did see auto loan delinquencies tick up in June 2007 and home equity three months later. But Ent’s delinquency rates have remained very low overall, increasing to .35% from .15%.
We’ve been doing workout loans for a long time, but we are certainly doing more now,” Vogeney said. “We knew it was time to be more proactive when a member who never missed a payment and was only two days late walks in and surrenders the home. No warning signs. Nothing.”(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com http://www.sourcemedia.com
