Letter from Employer to Bank

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Letter from Employer to Bank Powered By Docstoc
					NCUA WHITE PAPER-
12 Months later…

        PRESENTED BY:
       Helen Godfrey Smith
    Pres/CEO Shreveport FCU
Why the white paper…
 CDCU officials and Managers face
 Unique challenges
…lower share balances
…limited financial reserves
…serving low/moderate income consumers is
 often work intensive
…members of CDCU’s often are employed in
 areas where income is undocumented, etc.
CDCU’S deserve an informed
regulatory partner
 The regulator is often the source of
 guidance for the CDCU
 Many examiners are in-experienced in
 Community Development Lending
 The “paper” sends the message of
 sensitivity related to the challenges unique
 to CDCU’S
 The paper establishes a mode of thinking
 which recognizes alternatives to traditional
 underwriting criteria
THE PAPER DOES NOT…

 EXCUSE POOR MANAGEMENT
 PRACTICES
 INFER APPROVAL OF RELIANCE
 ON UNDOCUMENTED INFO
 ENCOURAGE POORLY PACKAGED
 LOANS
THE WHITE PAPER DOES…
  ENCOURAGE EXCELLENCE IN CDCU
  MANAGEMENT
…GOOD INTERNAL CONTROLS
…BUSINESS PLAN
…ACCURACY IN RECORDS
…FINANCIAL COUNSELING AS PART OF THE
  LENDING PROCESS
…IDENTIFIES COMPENSATING FACTORS
  SUPPORTING THE LOAN DECISIONS…
ALTERNATE INCOME VERIFICATION, POOR
  CREDIT HISTORY, OR NONE, ETC.
THE WHITE PAPER DOES…

 ENCOURAGE EXAMINERS TO
 LEARN ABOUT CDCU’S AND TO
 CONSIDER THE
 CHARACTERISTICS OF THE
 TYPICAL MEMBER AS THEY
 EVALUATE THE OPERATIONS OF
 THE CDCU.
TYPICAL CHARACTERISTICS
OF CDCU MEMBERS
  PEOPLE OF MODEST MEANS…
(WHAT DOES THAT MEAN?)
…MAY HAVE SPORADIC EMPLOYMENT,
  MULTIPLE JOBS, SIDE BUSINESSES
…MAY LIVE IN RENT SUBSIDIZED
  HOUSING OR PUBLIC HOUSING
…UNDER EDUCATED, NO LIVING WAGE,
  NO HEALTH INS.
…English may not be their language of
 choice
THE RESPONSIBLE CDCU
WILL…
 RECOGNIZE THE POTENTIAL FOR
 ADDITIONAL CREDIT RISK IN THE LOAN
 PORTFOLIO AND WILL BE OPEN TO FIND
 WAYS TO MITIGATE THE RISK.
 IDENTIFY TRANSACTION RISK AND
 ESTABLISH APPROPRIATE CONTROLS TO
 MANAGE THIS RISK…
 REDUCE PRACTICES AND PROCEDURES TO
 WRITING IN THE FORM OF POLICIES
 FOLLOW THEIR OWN POLICIES
ALTERNATIVE INCOME
VERIFICATION
 VERIFIED FILED INCOME TAX
 FORMS
 DIRECT DEPOSIT HISTORY WITH
 CU
 LETTER FROM EMPLOYER
 COUPLED WITH BANK
 STATEMENTS SHOWING DEPOSIT
 RECORDS
 OTHERS…
DOCUMENTING
COMPENSATING FACTORS
THAT LOWER CREDIT RISK
 PREV. CU LOANS PAID AS
 CONTRACTED
 SHARES AS COLLATERAL
 AUTOS, HOMES, EQUITY, ETC . AS
 COLLATERAL
 SUBSTANTIAL/LARGE/ANY DOWN
 PAYMENT
 RENTAL HISTORY OR UTILITY
 PAYMENT HISTORY IN LIEU CREDIT
 COSIGNER, GUARANTOR
POOR CREDIT HISTORY?

 EXAMINERS SHOULD SEE
 DOCUMENTATION EXPLANING
 THE POOR CREDIT
 LOAN OFFICERS SHOULD
 EXPLAIN IF THE CREDIT ISSUES
 ARE DUE TO TEMPORARY
 CIRCUMSTANCES, (LAY-OFF,
 FAMILY PROBLEMS)
POOR CREDIT HISTORY?
 LOAN OFFICER SHOULD NOTE
 WHEN COLLECTION ITEMS,
 JUDGEMENTS, ETC ARE PAID AND
 THE MEMBERS SHOULD BE
 ASKED TO BRING IN
 VERIFICATION
 MEMBERS SHOULD BE REQUIRED
 TO MAKE REASONABLE EFFORTS
 TO PAY PAST CREDITORS…
AFTER THE LOAN…
 A STRONG AND AGGRESSIVE
 COLLECTION PROGRAM IS A MUST…
 QUICKER THAN USUAL REACTION
 DOCUMENTED AND DETAILED
 COLLECTION NOTES
 ACCURATE DELINQUENCY REPORTS
 EXTRA EFFORTS TO SHOW ABILITY TO
 MANAGE HIGH RISK PORTFOLIO!
EDUCATION IS THE KEY…
 TO LEARN THE PITFALLS OF HIGHER RISK LENDING
 AND HOW TO HANDLE CERTAIN ASPECTS…
 WORK OUT LOANS MUST BE IDENTIFIED ON THE TRIAL
 BALANCE AND MONITORED CLOSELY
 A SEPARATE ALLL LOSS POOL MAY BE APPROPRIATE
 TO ACCOUNT FOR THESE LOANS
 BE CAREFUL WITH RE-AGING PRACTICES RELATED TO
 RE-STRUCTURED LOANS…SIX MOS OF PAYMENTS
 UNDER THE RESTRUCTURED TERMS…
 ESTABLISH METHODS TO IDENTIFY ALTERNATIVE
 UNDERWRITTEN LOANS TO MONITOR SUCCESS AND
 MAKE ADJUSTMENTS TO POLICIES

				
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posted:7/1/2011
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