In the fast-paced world of lending, every loan application tells a unique story. Each borrower comes with their own set of circumstances, desires, and challenges. As credit union lenders, it’s our responsibility to not only assess risk but also to find a path forward for these individuals. This is where the power of the counteroffer comes into play, transforming potential denials into opportunities for both the borrower and the credit union.
The Human Touch in Underwriting
Automated underwriting systems have revolutionized the lending industry, streamlining processes and increasing efficiency. These systems analyze vast amounts of data in seconds, delivering quick decisions that align with pre-defined risk criteria. However, while automation brings numerous benefits, it often lacks the nuanced understanding and flexibility that a skilled underwriter provides.
These systems will continue to evolve.
When an application falls just short of the criteria, automated systems tend to issue a straightforward denial. This can be a dead end for many borrowers who might have been just a few adjustments away from approval. Lenders, on the other hand, can identify these near-misses and offer counteroffers that bridge the gap between the borrower’s current situation and approval requirements.
The Art of the Counteroffer
A counteroffer isn’t just about rejecting an initial application; it’s about crafting an alternative solution that works for both the borrower and the credit union. This might involve adjusting loan terms, such as offering a lower loan amount, extending the loan term, or requesting additional collateral. By tailoring these terms to the borrower’s unique financial situation, lenders can provide a feasible path to loan approval.
For instance, a borrower might initially request a loan amount that stretches their ability to repay beyond acceptable limits. Rather than outright denying the application, an underwriter could offer a reduced loan amount that fits within the acceptable range. This not only supports the borrower in achieving their financial goals but also mitigates risk for the credit union.
Challenges of Automated Underwriting Counteroffers
Despite advances in technology, most automated underwriting systems struggle to efficiently generate counteroffers. These systems are designed to follow strict rules and criteria, often lacking the flexibility to consider alternative solutions. The rigid nature of automation can lead to missed opportunities where a manual review might have uncovered a viable path forward.
Moreover, automated systems typically lack the ability to communicate nuanced explanations and alternative options to borrowers. A seasoned, well trained lender, however, can engage in a dialogue with the borrower, understanding their needs and constraints, and collaboratively finding a solution that works. This personal interaction not only enhances member satisfaction but also builds stronger, more trusting relationships between the credit union and its members.
Embracing the Future: A Hybrid Approach
The future of underwriting lies in combining the efficiency of automation with the wisdom and empathy of human lenders. By leveraging technology to handle straightforward applications and using human expertise for more complex cases, credit unions can offer the best of both worlds. This hybrid approach ensures that borrowers who might otherwise be denied by automated systems still have a chance to secure the financing they need.
Encouraging underwriters to embrace the counteroffer is a crucial step in this direction. It empowers them to see beyond the binary yes-or-no decision and to use their judgment and experience to create customized solutions. This not only enhances the borrower experience but also contributes to the credit union’s mission of supporting its members’ financial well-being.
In the world of lending, a counteroffer is more than just an alternative; it’s a lifeline for borrowers navigating their financial journeys. By embracing the counteroffer, underwriters can turn potential rejections into opportunities, fostering stronger relationships and contributing to the long-term success of both the borrower and the credit union. As we continue to innovate and integrate technology into our processes, let’s not forget the irreplaceable value of the human touch in creating paths forward for those we serve.
It’s time to get your lenders trained on structuring loans and finding a path to approval!
Don Arkell
CU Lending Advice
don@culendingadvice.com