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

2.  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

3. In person Via the mail Online

4.  Review the loan agreements  Promissory Note and TIL  Security Agreement  Collateral Insurance Agreement  Credit Life and Disability Insurance Coverage  Notice To Co-Signers

5. 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

6.  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

7.  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

8.  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

9.  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)

10.  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”?

11.  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

12.  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

13.  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

14.  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.)

15. Thanks for participating today…