by Jacob Corlyon

Two Ways Lenders Should Approach Loan Modification Data

In the wake of COVID-19, many organizations have changed their business model to support their customers and keep their doors open. This is especially true for banks, credit unions, direct lenders, and other financial institutions—many of which have offered a significant number of loan modifications and payment deferrals over a short period of time. While these decisions will benefit the borrower, it’s important for lenders to remain forward-thinking, using customer feedback and data to safeguard your business today, and in the future.

Two-Layer Data Analysis

This begins with an effective communications plan to engage your borrowers and capture critical information on their ability to repay their loan. Armed with this data, you can predict how their financial situation will impact your business, and act accordingly:

1.) Establish a baseline for how much revenue you need to generate and when, to make sure you’re keeping your organization in a financially healthy place. Analyze items like:

• What are our fixed, variable, and operating costs?
• What costs can we minimize, defer, or eliminate if we need to adjust based on customers’ expected repayment timelines?
• Based on current revenue and cost levels, what are our best-case, expected, and worst-case operational scenarios?

2.) Organize and analyze the customer data you secured from your engagement strategy, so you can confidently answer:

• Will we need to develop and offer additional deferment plans to help borrowers transition?
• What percentage of loans will successfully reenter regular payment cycles following deferment?
• Will we need to increase loan loss provisions? By how much?
• How will repayment expectations affect the rest of our business operations?

Using customer feedback to begin answering large questions like this may open the door to more nuanced issues that arise for your organization. Let the data guide you to insights that will address your unique situation, and help you get ahead of the issues, frustrations, and challenges that your borrowers are telling you they’re facing. This isn’t just a way to better serve your customers, but an opportunity to protect your bottom line.

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.