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Qualitative Portfolio Assessment

Striking the balance between quality and quantity in both the lending and delinquency portfolio is an ongoing struggle for the average credit union. With advances in technology, when it comes to credit extension and delinquency control, the quantity piece of the collections model gets easier to measure each day. 

BCUS addresses qualitative component of the equation by comparing two or more quantitative pieces of data.  An example of this would be a comparison of the number of outstanding loans in a portfolio vs. the number of loans currently in delinquency in the same portfolio.

In this scenario, even with the aforementioned comparisons, the results will recommend whether or not your credit union is meeting an arbitrarily set goal for delinquency percentages which is still quantitative in nature. 

A qualitative analysis, by definition, is a comparison of factors which are not readily quantifiable, according to a specific set of criteria.  The result of this comparison is in no way numeric and if deficiencies that are revealed as a result of this comparison are corrected, they will have a measurable consequence on overall results in all quantifiable areas.

The Credit Extension Qualitative Review:

BCUS offers a credit extension qualitative review as a service.  BCUS initially examines loans that were recently approved.  Our process reviews documentation for completeness, as required for the type of credit extended.  From there, each loan is assessed to determine if all loan and account cross-selling opportunities were utilized.   Subsequently, BCUS reviews the loan applications that were denied by the credit union.  Once again, the documentation is examined to be certain that all appropriate paperwork and legally required notices were completed.  In addition, a review of the application, credit bureau, and any additional records is prepared to determine if there were any missed opportunities to restructure or counter offer the initial loan request. 

In many circumstances, the underwriter or loan officer makes a credit decision based solely on what the member initially applied for.  Frequently, even when the member does not qualify for what they originally requested, they may still qualify for a counter offering.

If the credit union wants to be the first place that their members turn to when they have a financial request, then the mentality of “order taking” must be substituted with one of "member needs identification and fulfillment."

The Delinquency Control Qualitative Review:

In addition to the credit extension qualitative review, BCUS also suggests a delinquency control, qualitative review. Just as on the lending side of the credit union, there are "order takers" on the delinquency control side.  In the world of collections they are colloquially referred to as "payment beggars."  This circumstance occurs when, during they daily course of working though a delinquency phone queue, the collector talks to a member who, within the conversation, offers a repayment arrangement that sounds reasonable. In the collector’s quest to get to the end of the call, he or she simply accepts the member’s preliminary offer and moves on to the next account in an effort to work through their delinquency queue.

The problem with this approach is that up to 50% of these types of delinquent payment arrangements are never kept.  The collector, in an effort to work hastily, has made an arrangement with a member that, let’s say is two months past due:

"Send me one payment today and another payment in two weeks time."

Thought this hypothetical conversation looks good on paper:

"Member has made verbal repayment agreement"

This situation is not actually reducing the collector’s workload; in reality they are actually doubling it. 

When BCUS professionals perform this type of review, our knowledgeable staff not only looks at the frequency of the collection efforts, but also considers the nature of said effort.  Truly reducing the size of the delinquency portfolio and giving the membership the best service possible requires that the collector transitions from just being a "payment beggar" to an "account resolver."

How the credit extension and delinquency control reviews focus the credit union’s efforts:

  • Ideal for merging credit unions to find hidden weaknesses in a portfolio
  • Easily identifies areas where credit union staff need more guidance
  • Provides credit unions with new options and methodologies to maximize results
  • Reviews are completely flexible regarding the number of accounts addressed
  • Enables the credit union to make more loans, thereby increasing revenue, and charge off fewer of those loans
  • Comprehensive findings analysis includes specific recommendations for changes that will benefit the credit union

For more information, please contact us at (281) 362-2752.