Plan ahead for loan delinquencies

Plan ahead for loan delinquencies

Be proactive to reduce pandemic’s bottom-line impact.

May 13, 2020

Being proactive can lower loan delinquencies both now and later as members and employees cope with the impact of the coronavirus (COVID-19) and stay-at-home orders.

That’s the advice from Lisa Cox, vice president of lending at $100 million asset CORE Credit Union, Statesboro, Ga., and Kevin Kesecker, executive vice president/chief administrative officer at $3.8 billion asset SECU, Linthicum, Md.

Cox and Kesecker, both members of the CUNA Lending Council Executive Committee, share their proactive approaches to staying ahead of potential loan losses.

Waiving fees, offering extensions

“We still have many members who are making their payments, but we also have many who are calling with ‘what if?’ scenarios,” Cox says.

CORE Credit Union is waiving fees for payment deferments and offering an initial two-month extension to members who need assistance. Additional two-month extensions can be granted as needed.

So far, 80 members have sought extensions for almost $1 million in consumer loans from CORE’s $69 million portfolio. CORE will soon offer mortgage extensions as well.

The credit union also aids members by waiving fees for cashier’s checks, excessive withdrawals, and pay-by-phone service, as well as some nonsufficient funds fees.

Cox says CORE has a “fluid plan” through year-end to respond to the virus and its economic impact. The plan addresses helping members and employees cope; monitoring delinquencies and community status; and adjusting the balance sheet as needed.

Kevin Kesecker

‘We’re doing what we can to tide members over.’

Kevin Kesecker

Tiding members over

SECU offers a variety of deferment and forbearance programs, including up to three-month deferments on unsecured consumer loans and up to six-month deferments for real estate loans, Kesecker says. It may add three more months of deferment if required by the COVID-19 crisis.

The credit union offers an unsecured personal loan of up to $10,000 with terms of up to five years with a discounted interest rate.

“We’re doing what we can to tide members over,” Kesecker says.

SECU also participated in the SBA’s Paycheck Protection Program, gaining approval for 110 small business loans worth $6 million to date.

The SECU MD Foundation is also offering $200,000 in grants for members in need. Kesecker says members expanded the amount available with “heartwarming” donations of $45,000.

Another $200,000 in foundation grants will aid community organizations.

It will be essential to monitor internal and external data through early 2021, Kesecker says. Wide-ranging information, such as unemployment projections and home and vehicle values helps SECU spot broader trends likely to impact the balance sheet.

“Preparation and communication are critically important,” Kesecker says.

Best practices

Kesecker and Cox recommend these practices to reduce delinquencies:

  • Communicate early and often. Use the website, email, and social media to offer solutions.
  • Use clear language and explain key terms. Members may not know the difference between “forbearance” and “deferment,” for example, Kesecker says.
  • Reach out to members who make inquiries or are late with payments. CORE Credit Union calls every member whose payment is more than 10 days late.
  • Focus on current members. Hit “pause” on programs aimed at attracting new members or introducing new loans.
  • Be flexible and empathetic. Cox recommends avoiding “one size fits all” solutions because everyone’s situation is different.
  • Offer self-service options. Kesecker notes that some people who won’t ask for help will click on an offer of assistance.

The CUNA Councils will hold a virtual roundtable May 29 called “Credit Quality Trends: Where we are and where we’re going.” It’s available free to members of any CUNA Council.