by Jacob Corlyon

Two Ways Lenders Can Engage Borrowers During a Loan Modification Cycle

In a matter of weeks, COVID-19 has sent shockwaves through the lending industry. For banks, credit unions, direct lenders and other FinTech organizations, customers have shifted gears from aggressively planning for the future to focusing on immediate concerns.

In many cases, an unprecedented number of borrowers have requested loan modifications or payment deferrals. Lenders need to get ahead of the repayment cycle associated with these requests so they can minimize impacts to their bottom line, and keep customers financially stable enough to continue meeting payment responsibilities.

One way to do this is to engage your borrowers. Not just to reassure them and offer support, but to gather valuable data that can inform business decisions for your organization. Begin by creating a comprehensive communication plan, and follow up with a survey of borrowers who took a loan modification.

Establish a Communications Plan

Your borrowers are likely concerned about what the future will hold, and how they will cover their upcoming expenses. Creating a thoughtful and strategic communications plan will reinforce a positive experience with your business, and will ensure the right information is shared with your borrowers:

• Start by gathering all departmental stakeholders so you have a robust set of perspectives on the needs of your business and your customers.
• Design a schedule for outreach that doesn’t inundate borrowers, but gives them all the pertinent information they need about their deferral situation, and what they can expect from you during this period.
• Communicate on all the brand channels that your borrowers are turning to for information: social media, email, direct mail, monthly statements, website updates, mobile app notifications, drive-thru signage, etc.

Design a Loan Modification Survey

As part of your initial outreach, design a survey for borrowers who took deferments to measure their behaviors, as well as details about their financial situation and forecast.

The information obtained will help inform how you engage beyond the initial request.You might consider questions like:

• Has your financial situation changed since you took a loan deferment with us? How?
• Do you expect to return to work or have your business reopen before your next loan payment is due?
• What is the likelihood on a scale of 1 to 10 that you will be able to make your loan payments after your deferment period is over?

You may want to reach out to borrowers who indicate excessive timelines for restarting payments or who request multiple modifications, in order to get a better feel for their situation. Are they experiencing additional hardship beyond the current situation, or are there other factors at play? Having these 1-on-1 conversations with customers will help you check your data and help you set expectations for borrowers who actually do have the means for making payments but may be looking to take advantage of the circumstances.

Preemptively engaging with your borrowers is just the first step to being able to make informed decisions about your business and mitigate the chances of default from customers who deferred payments. To learn how to use the data you gather from your engagement campaign to successfully navigate a loan modification strategy, stay tuned for the next part in our series.

Jacob Corlyon is Co-Founder and CEO of CCMR3, which provides a suite of collection services for the dental industry. Mr. Corlyon also serves as President of the New York State Collectors Association.