Published by the Credit Union Association of New York

mortgageindustry
Collection strategies: Working with members
to reduce delinquencies
By Arthur Chuang, Home Assistance Manager, CUC Mortgage Corporation
GGOOD NEWS: ACCORDING TO THE EQUIFAX JUNE NATIONAL
Consumer Credit Trends Report, delinquent balances on first
mortgages have plunged 37 percent—along with the biggest
drop in 90-day plus delinquencies, which have dropped 45
percent since January 2010.
Reasons include a combination of factors, such as a
slightly improving economy since last year, mortgage
modifications, short sales, deed in lieu and foreclosure sales.
There is also an increased emphasis on trying to reach out
to the homeowner as quickly as possible when a loan becomes
delinquent. Mortgages used to be the number-one bill to pay,
but not anymore. With stagnant wages and ever-increasing
costs such as medical, food, taxes and energy, some people
would rather make their car payment and have at least one
credit card current before paying their mortgage.
By increasing the number of calls and reaching out to
members as early as possible in the delinquency process, as
well as sending out reminder notices, late notices and preforeclosure
letters, you can help “remind” members to make
timely mortgage payments. If the member cannot make the
payment, then the goal is to have them explain to your credit
union or your servicer when they can make their payment
and, if they cannot commit, to look at other options.
The earlier your credit union can reach out to the member,
the easier and greater the likelihood that you can avoid having
the loan become severely delinquent and even go into a
foreclosure status. If you hear a member mention the words
“hardship,” “reduction of income,” or “a payment is going to
be late,” it should set off an alarm that immediate assistance
or action may be necessary.
When speaking with a delinquent homeowner, it is
important to remember that it is a two-way conversation.
Credit union collectors need to listen and understand the
member’s problem. The member should be made to feel
comfortable so they are motivated to work with your credit
union and find a resolution.
You also want to make sure that the member is being
given definitive responses to their questions. They should feel
that they are speaking with someone who has the correct
answers—without having to be placed on hold or transferred
numerous times. Keep in mind that the member is most likely
under a lot of stress from not being able to keep credit current
on their mortgage payments, possibly due to a previous
unforeseen financial circumstance such as a medical hardship,
disability or job loss/reduction of hours.
Another recommended option is to have your credit
union’s collector(s) learn not just collections, but also loss
mitigation (e.g., modifications, short sales, deed in lieu). They
should also be knowledgeable in foreclosure and bankruptcy
so that they can provide information about all available
options. The goal is to try to resolve the member’s problem in
one call if possible. This is easier said than done, however, as
the average ratio of staff turnover in the collections industry
is about 25 percent.
The ever-changing laws and rules, as well as the constant
shifting of the political and social climate, also make managing
collections a challenge.
Recent changes in the Bankruptcy Code on Chapter 13
Mortgages (which became effective Dec. 1, 2011), as well as
the probable expiration of the Mortgage Forgiveness Debt
Relief Act and pending expiration of upcoming payroll tax
credit cuts and other tax credit cuts, are three key examples
where laws have changed or will be changing. The expiration
of the Mortgage Forgiveness Debt Relief Act could impact
future short sales, as members will have to report the difference
from the savings of a short sale as income on their 2013
federal taxes going forward. The unlikelihood of Washington
resolving the looming “fiscal cliff” before the end of this year
also could have an impact on your average borrower since
their net pay may be reduced effective Jan. 1, 2013.
One thing is certain: Collections is always changing. As a
result, credit unions must adjust and adapt to the ever-increasing
needs and wants of their members while also considering the
big picture of what could impact performance in the shortand
long-term. ■
For more information about mortgage servicing, contact Arthur
Chuang at arthur.chuang@cucmortgage.com or (800) 342-4998,
ext. 8226, or Kathleen Bartley at kathleen.bartley@cucmortgage.com
or (800) 342-4998, ext. 8227. To learn more about the services
provided by CUC Mortgage Corporation, visit
www.cucmortgage.com.
18 SEPTEMBER 2012 Connection