Generally, the workout process is divided into two phases: forbearance and foreclosure. Forbearance is your best chance to get out of the trench with the least injury. It requires a combination of the hard skills loan officers excel at and the more difficult to master soft skills of communication, dispassionate negotiation and tactful honesty.

Combined, these skills go a long way toward establishing the kind of trust and engagement that are necessary to work together on a solution. Assuming your members are equally engaged in the process, finding ways to restructure loans, reduce rates or identify additional collateral to help them save their business will save credit unions money and time in the long run. The fact is, everyone loses when forbearance gives way to foreclosure.

Members lose their business or their property. They frequently enter bankruptcy proceedings, which will adversely affect them in multiple ways for years. Credit unions lose too. Losses mitigated by resolving the troubled loans are frequently increased by attorney and property management fees, as well as a prolonged asset disposition process.

Although it requires more time and effort, focus on forbearance first.

Many credit unions don’t keep a workout specialist on staff. In the usual course of business, loan officers are tasked with managing problem loans as they materialize.

Getting ahead of problem loans is likely on your proverbial radar, particularly in preparation for regulatory exams. Managing loan workouts may be beyond the scope and abilities of current staff and you may need workout specialists with more skills and experience to navigate and expedite the process, to ensure a high level of member service and to best serve the needs of the credit union.

Now is the time to begin shoring up those additional resources.

Dedicating time and resources to effectively manage the potential increase in workout in the coming months will do more than just get credit unions through a difficult period. If done well – at optimal staff levels and with a focus on forbearance – it will help smart credit unions both retain members and gain new ones.  It will also set them apart from competitors – big and small – that haven’t made the same commitment to addressing troubled loan work out.

People seek out credit unions for their personal touch – because they want to be more than an account number. They expect that kind of personal service from their credit union in good times and bad. There couldn’t be a better time than now to over deliver on that expectation.

Working closely with members to resolve their loan issue with the best possible outcome – fighting in the trenches with them – will yield dividends of good will and reputational equity for years to come.