FORT WORTH, Texas — Loan workouts don't need any souped-up, specialized technologies, say two large CUs-despite some vendors' suggestions to the contrary.
The "regular" lending technology at American Airlines FCU (AACU) here works just fine for workouts and traditional loans alike, said Lois August, manager, credit education department, which has handled a significant number of workout loans since it started modifying loans more than a decade ago, she said.
"I wouldn't look for anything different or specialized in terms of technology," said August. "We like to keep our workout loans in the same system as our other loans because we want to be able to account for them."
But perhaps loan workout tech could do an even better job of tracking and reporting loan workouts? The answer is 'no,' according to both August and Chris Caputo, AVP-collections at San Jose, Calif.-based Meriwest CU.
"It would be an unnecessary expense and our current operation runs well without any additional loan servicing programs," said Caputo. Meriwest processes and tracks all loans — including workouts — within its Symitar core system. The $1.3-billion CU reports on modified loans by exporting the loans from Symitar into Microsoft Excel format.
At Meriwest, less than 1% of all loans are classified as modified, Caputo said. "With our relatively modest volume of defaults, we don't see the need for a new type of software."
However, Meriwest does see the need for centralized collections tools, he said. To that end, the $1.3-billion CU will install the Episys Collections Toolkit of software and services from Symitar in August. By storing collections data in a central repository, the Toolkit will enhance default tracking and offer detailed reports of repossessions, foreclosures, bankruptcies and charge-offs, Caputo said.
Meriwest processes and tracks all loans — including workouts — within its Symitar core system. The CU gets an overview of loan defaults by using the SAP BusinessObjects tool to report on loans from the data warehouse.
AACU's approach is straightforward, said August. "Our system works very smoothly as far as entering the workout loan terms and disbursing the loan," she said, explaining the credit education team simply enters the modified loan as a new loan into the system. The approach poses no problems for the CU's accounting department, either, she added.
The $5.3-billion CU is able to track workout loans by entering a code that identifies them as workout loans, August continued. That gives the CU the freedom to report on its loan portfolios with or without figures that reflect modified loans, she said.
Although the practice of entering workouts as new loans with special codes "works great," the CU is considering taking a shortcut, said August. Rather than creating an entirely new account for the workout, it might be faster to change the existing loan to a workout via the lending system's "loan change" screen. That shortcut would require some additional training for the CU's credit education staff, which is responsible for loan workouts, she said.
Most of the manual labor that goes into loan workouts happens in the loan approval stage, August said. "The most difficult piece is getting the person approved, and it has nothing to do with technology," said August.
"Exception loans aren't under normal lending guidelines and have to be approved manually," she explained. "Three different departments at different levels look at each loan to make sure that we're being fair and consistent with all of our members."
