STCU Proves Teamwork Makes the Financial Dream Work
July 6, 2021
Delinquent borrowers at STCU receive more than phone calls, letters, and emails seeking to make payment arrangements.
Since the Great Recession, the Liberty Lake, Washington-based cooperative has used a dual approach that offers assistance, including troubled debt restructuring (TDR) in conjunction with financial counseling and related services.
The approach has worked for more than a decade, with the pandemic putting the team’s skills to the test during the past year and a half.
“Our TDR portfolio performs well with charge-offs less than 1%,” said Jessica Golladay, a 10-year employee at STCU who has served as the credit union’s Director of Consumer Lending and Servicing for the past two. “It’s worth our investment to support our members.”
Below, Golladay explains further.
When and why did STCU create the financial relief team?
Jessica Golladay: STCU established the FRS (Financial Relief Solutions) team after the 2008 financial crisis to support members experiencing significant financial burden as a result of declining home values, job loss, and more. Since the program’s inception, the team has taken 7,590 referral applications for troubled debt restructures.
How many people are on the FRS team? What are their responsibilities?
JG: Three full-time FRS officers are responsible for underwriting consumer and real estate workout loans within the credit union’s risk appetite. They are certified financial counselors who aim to strengthen the member’s financial situation as well as mitigate credit union loan risk.
The team most often works with troubled debt restructures, which are loan modifications that meet specific and defined weaknesses. The credit union must demonstrate a borrower has a true financial difficulty and needs a loan concession that would not be approved under normal credit risk tolerances.
How does the FRS team fit into STCU’s collections department? What kind of loans does it handle?
JG: The FRS department is a close partner with loss mitigation and receives most member referrals from that source. They report to Debra Jackson, our Consumer Lending Underwriting Manager. Due to the nature of their roles with lending authority and assessing overall borrower risk, it’s been a great fit.
The majority of workouts are for consumer secured loans, followed by mortgage and credit card, which is reflective of our lending portfolio mix. Each of our FRS officers handles 15 to 30 workouts per month, depending upon complexity.
Has the FRS team changed since the pandemic?
JG: Yes. Within weeks of the onset of the pandemic, FRS had 12 employees from across the credit union working with members in need of loan payment assistance. We used a lean management approach to build streamlined tasks on which we could easily train new staff to support members. STCU no longer needs that level of staffing for the program, but it was a great learning experience.
How did the pandemic affect your membership and the FRS team’s work?
JG: Within a week of the pandemic, the need was widespread and impacted a significant portion of our member base. Using the CARES Act guidance, our software development teams, working in partnership with lending, created a digital self-service payment deferral tool. This allowed our FRS team to focus on helping members with more complex needs.
Did the team go virtual, or were they already? Where are they working now?
JG: They have been virtual and working remotely for many years. That experience led to minimal disruption in daily operations.
What challenges does the team take on for STCU and its members?
JG: There are times our members face life-altering financial impacts from income loss or other situations. COVID-19 unfortunately increased the number of members in these challenging situations.
Our senior FRS officers and manager not only provided payment support to members for STCU loans but also connected many members to community financial support. We partnered with our STCU community relations team to stay abreast of all local support available, such as grants, utility bill support, and more. This approach improves the health of the member’s financial state while mitigating our loan risk.
What opportunities does the team take on for STCU and its members?
JG: The FRS team builds strong member relationships that go beyond a typical loss-mitigation conversation. Members often thank the team for helping them into a better position. Many members pay as agreed and return to STCU for future financial needs.
What is the team’s quantitative impact?
JG: The average 60-plus day delinquency for the TDR portfolio is less than 2%, and charge-offs are less than 1%. However, the current low charge-off of 0.59% reflects the positive impact of stimulus funds over the year and is not a typical experience for STCU.
Since the program’s inception, the FRS department has restructured $107 million in loans that would have otherwise defaulted and worked through our normal loss mitigation channel. The current portfolio balance is only $20 million.
What advice do you have for credit unions that want to set up a similar team?
JG: Set up the infrastructure to provide workout loans to members on a regular and consistent basis. Because STCU had an established FRS program, it was easy to accommodate increased volume as a result of the pandemic. Whether it be a pandemic or other economic factor that causes unexpected unemployment for your membership, be prepared and have a scalable program.
What is a lesson learned or something to avoid?
JG: Be cautious of scope creep within the FRS department. These are typically small teams with specialized skill sets and are not meant for short-term or traditional loss mitigation efforts. Align the referral partnerships with loss mitigation and contact center teams to ensure members are referred only if they fit established criteria of what an FRS department can do to assist.
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