Presented January 12, 2010 by Cheryl Fatnassi, Opportunities Credit Union

Loan Closing Loan Servicing

Loan Review/Quality Control Perfecting Interests in Collateral Insurance

Loan Reporting/Guarantees/Life Events Death, loss of income, bankruptcy, divorce Late payments Collateral damage/losses

•In person•Via the mail•Online

Review the loan agreements Promissory Note and

TIL Security Agreement Collateral Insurance

Agreement Credit Life and

Disability Insurance Coverage

Notice To Co-Signers

CREDIT LIFE INSURANCECREDIT DISABILITY INSURANCE

Premiums may be added monthly to the loan or financed as part of the loan up front depending on the insurance company/state laws

Upon death of the insured, generally pays the loan in full or up to the limit of coverage

Premiums handled same as life insurance.

Makes monthly payments in the event the insured is disabled following any excluded period (i.e. first 10 days of disability).

Requires paperwork from the borrower and doctor validating disability claim.

Payments can be delayed on loan while borrower files

Security Agreement Describes any

collateral on the loan Requirements for

maintaining collateral

Must be signed by all owners of the collateral even if they are not responsible to repay the loan/note.

Perfecting your interest in the collateral: UCC Filing Title Mortgage Deed

Promissory Note is the agreement to repay a specific amount and identifies the terms of payments:due dates, default/late fees, collateral description, etc.

Truth In Lending disclosure (TIL)/Regulation Z

TIL ensures borrower knows the cost of the loan and can compare different financing options=“The Boxes” Amount Financed Annual Percentage

Rate Finance Charge Total of Payments

Payment options: Coupon Book or

Monthly Bill-manual payment by borrower

Automatic payments (ACH/EFT –bank automatically takes payment from borrowers account at a bank or credit union)

Recurring bill payment

ACH/EFT Borrower authorizes lender to

take their monthly payment on a specific date until further notice.

Good option for borrowers who keep money in their account and want to avoid mailing payments/forget to mail them

Not good option for borrowers who fail to keep money in their accounts, forget to track their balance who will incur Returned Item/NSF fees from lender and bank where deposit is held

Damage to collateral partial or full loss-

generally insurance will pay for damage less deductible

lender will expect repair estimates

lender will hold money in escrow until repairs are done or may payoff loan if balance is less than loss.

Life Events Loss of /reduced

income Divorce Death Illness Other (gambling,

drugs, alcohol, shopping or other unplanned strains on the budget)

Guaranty Agreement covers terms of your guarantee: % of loan guaranteed (100%, 75%...) Length of guarantee (i.e. life of loan, released after 2

years of timely payments) What you agree to payoff: principal balance, late fees,

interest, legal costs to dispose of the collateral, other Do you own the collateral after you pay the loan off or

does the lender have to sell it and give you back any recoveries?

If there are very few loan losses and you have built up a history with the lender, can you reduce the guarantee for certain types of loans or after they “season”?

Loan modifications: Reduction in rate (you

might subsidize the cost of this for a period of time)

Reduction in monthly payment-increase in # of payments

Forbearance (period of time when borrower does not make payments –from 1-3 months-then modify payment or term)

Borrower’s income and expenses going forward

Temporary or permanent change in income or expenses

Borrower’s payment history prior to this late payment event

Lender’s willingness to work with you and the borrower

Agreed to in writing-changes terms of original loan

May require a hardship letter and budget showing borrower can make payments going forward

Good option for temporary hardships

Borrower voluntarily surrenders the collateral

Borrower sells the collateral for full or partial settlement of the loan

Borrower agrees to a lien on property that is paid at time of sale of the asset

Monthly Trial balance shows loans outstanding, balances, due dates

Past Due/Aging-tracks late payments and due dates

Delinquency/Charge-Off History Report (build this yourself and update monthly)

Use good performance to leverage your loan pool Delinquency <2%-reduces

lenders cost to collect and service the loan

Charge-off % <1%- lender may be willing to release your guarantees on some loans allowing you to make more loans with a smaller reserve ratio (start with 90% and go from there.)

Thanks for participating today…