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Paper explores lending to newly credit-challenged
MADISON, Wis. (7/8/11)--A new white paper from the CUNA Lending Council, “Lending to the Newly Credit-Challenged: A Second Chance for First-Time Defaulters,” examines a back-to-basics approach for exploring loan options with members who’ve experienced credit setbacks for the first time. These potential borrowers--many of them victims of the economic downturn and who are turning the corner on their personal financial crises--represent a significant portion of total credit union membership. One in 10 Americans fell behind on their loan payments for the first time during the recent recession, according to a 2010 survey by the Deloitte Center for Financial Services. Working with members to restore their credit and financial standing presents an opportunity for credit unions to bolster loan volume and build loyalty. It also requires a time investment in revisiting loan policies and practices and retraining staff to look beyond credit scores in assessing members’ ability and willingness to repay, according to Bill Vogeney, senior vice president/chief lending officer for Ent FCU, Colorado Springs, Colo. This approach to lending is “relationship-driven,” Vogeney said. “It’s all about the story of each individual member. We need to know what borrowers have to say about their past situations as we make loan decisions.” The CUNA Lending Council white paper explores the trends behind the current economic climate and relates them to lending with interview scenarios. It also examines the need for staff training, the reasons behind the organizational shift to centralized lending and the benefits of financial counseling. The white paper also provides additional planning and action steps to help members regain their financial footing and to help credit unions put their “people helping people” mission into action in a way that sets them apart in the financial services marketplace without increasing delinquencies and charge-offs.
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