CUES Skybox

Shared Appreciation Mortgage: Help or Hindrance?

Posted by Lisa Hochgraf

In late May, NCUA issued a legal opinion letter stating that credit unions are permitted to offer shared appreciation loan modifications for members struggling to make their mortgage payments so long as these modifications are conducted in a safe and sound manner.

A shared appreciation mortgage is a home loan offered with a very low interest rate, or that forgives some principal, in exchange for a share in the home's profit at its sale. In other words, with a shared appreciation mortgage, homeowners are offered the chance to write down a portion of their mortgage debt but, at the same time, they are required to share future appreciation gains with those who helped them out.

In the current economy, anything that helps CUs help struggling members is probably worth a good look. (Read "Responsible Debt Relief" from Credit Union Management magazine, which describes RIT Professor Robert Manning's take on why forgiving some debt may well be worth it.) On the other hand, shared appreciation mortgages are not without their drawbacks.

For example, as I read up on SAMs, I found it likely they could face the same problem faced by another kind of specialty mortgage--the reverse mortgage: a high potential for backlash.

Some people charge that the fees associated with reverse mortgages are too costly for borrowers--and that the children of seniors who take out a reverse will be disappointed when they find out that all the equity in their parents' home has been mined before they could inherit that stored wealth. (CUES members can download our reverse mortgage briefing here; non-members can download the briefing's executive summary. Also read Christian Mullins' Skybox post about reverses.)

In similar fashion, consumers could be disappointed when it actually comes time to give their shared appreciation mortgage lender a portion of the proceeds from their home sale.

But I don't consider myself a true lending expert. So I also checked in about SAMs with someone who is: CUES member Bill Vogeney, SVP/chief lending officer at $2.8 billion Ent, Colorado Springs. (Read my recent post about Vogeney.) Here are his thoughts on the matter:

"We're not in one of the ground zero states, so shared appreciation mortgages are not on our front burner as they might be for one of the credit unions in Florida, California, Arizona or Nevada.

"Still, I'd be concerned about what kind of incentive the borrower would have to keep their house in tip-top condition. Would they invest $7,500 in a new roof in three years? Would they change the carpeting if they knew the credit union would get half the increase in the value of their home by doing so?

"Better yet, does this seem like a good idea, but one that few consumers would agree to? Foreclosures today are happening to people:

    "1. Who lost their job. A SAM might not allow them to stay in the house anyway, if they have no income.

    "2. Who bought way too much home to begin with, hoping to flip it. When they can't afford the mortgage even being fully employed, and the allure of the big profit goes away, will they be willing to stay in the home for the long haul?

    "3. Who are only looking at today's value, that they're upside down. It's always happened with auto loans: People wake up one day, try to trade, and find out they're $5,000 upside down. They make a very short-sighted decision. Not sure that the short-sighted thinkers will look to shared appreciation as a solution.

    "I could be way wrong," Vogeney concludes. "It could be the solution for many credit unions. It probably is worth considering for those credit unions in the worst-hit areas."

What's your take on shared appreciation mortgages? Help or hindrance?

Lisa Hochgraf is board/operations editor for CUES' Credit Union Management magazine and edits the CUES Tech Port e-newsletter, News to Go.
 

Professional Development Tidbit: Vogeney's Views

By Lisa Hochgraf

If you're a lending professional in CU land that hasn't yet read an article by CUES member Bill Vogeney, it's time to take a gander. SVP/Chief Lending Officer at $2.5 billion Ent, Colorado Springs, Bill's been contributing articles for CUES for some time and we are sure lucky. He has written about topics including the future of credit scoring and managing loan pricing. And he's lending (ah, the punniness of that!) a lot of perspective lately about how CUs got to where they are today.

Find the collection of Bill's CUES articles by searching cues.org for "Vogeney."

And watch your mailbox for the upcoming August issue of Credit Union Management magazine. In the operations section you'll find Bill's "Loan Zone" column, "After the Golden Age," which talks about how to move forward in this new era after consumer lending has passed its peak. (Ask for a preview in your comment, and I'll get one to you soon.) 

Lisa Hochgraf is board/operations editor for CUES' Credit Union Management magazine and edits the CUES Tech Port e-newsletter, News to Go.

Regarding Reverse Mortgages, Education is the Key

By Christian Mullins

Embracing a lifestyle many couldn’t afford, subprime mortgages offered home ownership, the cornerstone of the stereotypical American dream, to almost everyone who wanted it. Though the worst of the subprime mortgage meltdown appears to be behind us, we continue to see and feel its effects, including increased skepticism towards our financial institutions and the products they offer. Reverse mortgages, a relatively new lending product, will likely be given a second look, and it's important to accentuate the positives, acknowledge the potential negatives, and proactively educate our members so they may make informed decisions based on their financial situation.

Available to homeowners aged 62 or greater, a reverse mortgage allows access to the equity in their home, either in monthly increments, a line of credit, or a lump sum. If a homeowner has an outstanding mortgage balance, shedding that monthly payment while increasing their cash flow is a win-win proposition. In addition, a reverse mortgage may allow a greater percentage of the Baby Boomer generation to retire on schedule, even with the downturn in the stock market. The loan never expires so long as the home remains their primary residence, and the member is protected (by federal insurance when borrowing through a federally backed program, which is common) from having a larger loan balance than the home's value. 

However, there are some potential long-term downsides to reverse mortgages as well. Americans using reverse mortgages as a primary source of income may find their futures tied into local housing markets, which are prone to both positive and occasionally negative fluctuation. In the unlikely event that a local economy is shattered and home values plummet, a small percentage of reverse mortgage homeowners may feel disagreeably bound to their home until housing prices recover. Should these homeowners suddenly find themselves in an unfavorable situation, they may cry foul, with stories of heartbreak finding their way into newspaper and television reports. While this slanted and generally unfair interpretation of events would likely represent a small fraction of reverse mortgage holders, it is the kind of compelling story that was all too often used to attack financial institutions over the past two years.

Should credit unions turn their backs on reverse mortgages? In a word, no. In many circumstances, reverse mortgages allow members the financial freedom to live enriched lives. However, credit unions should offer to meet in person, rather than offering a disclosure pamphlet, with their members on a yearly basis to discuss both the condition of their local housing market as well as the remaining equity in their home in an effort to minimize any potential pitfalls. Credit unions cannot prevent members from making poor financial choices, but they can and should educate members so they may make informed choices, both before and after they enter into a reverse mortgage.

Christian Mullins is a strategic analyst for the credit union industry and author of the CU Potential Blog.

Calm Leaders = Calm Waters

By Bill Vogeney

Writing is one of my favorite activities when I want to unwind. And I do need to unwind. Over the last four to six months, I've felt like a 7-year old with ADD instead of a 47-year-old credit union vice president of lending. The cause of this workplace ADD is the state of the economy and the financial markets. My "worry list" has changed about every 30 days, except that nothing is really falling off the list. The list just keeps getting bigger:

• rising delinquency;
• members who are making very bad, short-sighted decisions to walk away from their cars and homes even though they can make the payments, just because they're "upside down";
• $147 a barrel oil (well, one thing off my list, thank goodness);
• slowing consumer loan volume;
• ALM issues with a growing mortgage portfolio;
• the economic impact of trillions of dollars of wealth wiped out in the real estate and stock markets and
• an impending NCUA exam.

Recently, I added the concern over how we'll be able to handle mortgage volume that will make the refinance boom of 2003 look like a slow year. Not to mention how we'll re-invest the funds from the sale of sub 5 percent coupon loans, because there is no way we're holding them in the portfolio. We'll unload our interest rate risk, along with a lot of future earnings, if rates hold for any measureable length of time.

These are indeed some turbulent times—the most challenging economy this country has faced since the early 1980s. What credit unions need is calm leadership if we want calm waters. For example, one of my biggest complaints with the lending industry over the last 20 years is that credit standards have fluctuated like a boat in rough waters. When times are good, lenders chase all the business they can, and standards go overboard (I was going to say "out the window," but I want to avoid mixing metaphors). When times are tough, these same lenders tend to over-react and pull back on lending because they don't have a strong comfort level as to how their portfolios will perform.

I've always believed in being a steady Eddie kind of lender. I like making small and manageable adjustments to credit policy. I have the good fortune of working in Colorado, so we didn't have the 20-30 percent yearly price appreciation that California and Florida experienced. We've also avoided the 20-30 percent price declines. But I can tell you that 5-10 percent declines per year are still pretty painful to our members.

Because of our area, we're still making 90 percent loan-to-value home equity loans. However, I've heard many stories about banks and credit unions lending 70 percent LTV in economically troubled areas. It's the ultimate double whammy. Homes are worth 30 percent less, so you won't make as many equity loans. Then, you only wind up making a loan equal to 70 percent of the value. Institutions in these areas might as well close their lending area and fire the employees.

Still, if you're in this situation, and you're confident of your appraiser's ability to value the homes, you should be able to make 80 to 90 percent LTV loans without undue losses—if you find the right borrowers.

Without a fresh supply of good loans coming into your portfolio, dealing with the large number of problem loans will be even more difficult. Do yourself a favor and see if you can find your loan policies from five years ago. What was your maximum LTV? What kind of FICO distribution were you willing to accept? How much did you bend your policy since then? If you stayed stable, you should not have to make drastic changes to your policy now.

I will admit, for some of you, it may be hard to look your CEO and board chair in the eye and talk about the need to keep lending, to stay calm, and to not over-react to this buffet of bad news served up almost every day. But making good, new loans really is crucial to getting out of this mess we're in.

Bill Vogeney is SVP/chief lending officer for $2.5 billion Ent, Colorado Springs, Colo.

Read Vogeney on indirect lending and credit scores.

 

 

Economic Action Plan

By Dennis Gibson, CSE

As this is written on Jan. 1, 2009, many, many people are thankful that 2008 has been left behind. The numbers tell us that the final quarter of the year just completed was the worst for the nation's economy since 1931. There is widespread belief, however, that the quarter has taken us near the bottom for this round, and signs of the beginning of recovery will be seen as early as mid-year. This, of course, is merely conjecture, and remains to be seen.

The direction in which the economy spins will have a basis in the decisions made and enacted by the incoming administration and the, virtually, single-party control of Congress (I say "virtual" control, as the potential for Republicans to filibuster in the Senate remains a possibility). But how does all this affect Credit Union Land, and what actions are needed from each credit union's leadership?

The two functions each credit union must succeed in fulfilling are:

• serving the financial needs of its members and

• remaining financially solvent.

Most certainly, the country's economic recession is providing a number of stumbling blocks for credit union leadership as attempts are made to succeed in accomplishing these key tasks.

As in any viable business, managing a financial institution's revenue and expense, in order to provide for a positive bottom line and a stable (or even growing) capital ratio, is paramount. If any credit union does not have a plan/budget in place as of the first business day of the year, then, perhaps, new leadership should be considered. One cannot count on luck—particularly in such an economic turmoil.

The key to the plan's success is the timely and correct control of the asset/liability function, and the associated maintenance of proper pricing. In a business environment with financial issues and problems coming from, seemingly, endless directions and points of origin, where does one invest and receive a viable return on the investment? The traditional investment vehicle for credit unions has been consumer loans. However, consumers have slowed spending and the associated borrowing. In addition, many of those who have borrowed, or currently wish to borrow, are no longer in a position to assure repayment of the loan (particularly if loan policy has been adjusted to reduce the risk of loss).

The second traditional form of investment has been in the monetary marketplace (CDs, Treasuries, bonds and so forth), but the current return on insured investments (and uninsured investments are, quite likely, simply too much of a risk in the current economy) is very low. The rates, in fact, have hit record lows.

What is a credit union leader to do? Since there are, pretty much, only less-than-ideal places to invest, credit union leadership should price deposits as low as possible. This means as TRULY low as possible.

With Treasuries and fed funds at the .25 percent mark, how can shares be priced at upward of 1 percent, or even more; and how can money markets pay greater than the overpriced shares? Ultra-conservative pricing should be the mode, even if it results in a slowing of asset growth. The worst-case scenario results in some temporary asset shrinking, but a retention of a viable capital ratio.

Along with the lowering of liability pricing should come a maintaining of loan rates at mid-2008 levels, and a willingness to raise rates at any opportunity. While this may not sound like the "Credit Union Way," the recommendation isn't being made to increase spread and capture windfall profits (although maintaining a viable spread is necessary). It is being made due to the fact that once the current economic wounds have healed, inflation will be bombarding us like a barrage of cruise missiles. Leadership does not want to be two years into a large volume of five-, six-, and even seven-year consumer loans at a rock-bottom rate when this inflation comes thundering through. Does anyone remember the rates during the very early 1980s and the number of thrifts that failed as a result?

Is it a guess that inflation will hit, and hit hard? Not at all! The government is now printing money to provide for bailouts and stimuli to attack the current economic ills. Basic economics tells us that, no matter how wise or needed such action may, or may not, be in the near term, the result will be inflation once the economy begins to recover; and the amount of money being "created" assures tremendous inflationary pressures.

There is also the release of pent-up buying that occurs once consumer confidence (another measure that is at an all-time low) returns. After holding on to older vehicles and missing out on updated technology in consumer products, our general materialism will spur a recession-weary public to spend, spend, spend!

At the same time credit unions are keeping a close watch on interest rates, they must control operational costs. Consider whether all your organization's processes and procedures are up-to-date and efficient, and whether staff is performing up to the level called for by such demanding times. For example: How many credit unions would find that implementing Check 21-based clearings for deposits would quickly pay for itself, and soon begin to be an expense reduction? Many more than the number that have already initiated the process, that is for sure.

Another challenge is the loss of revenue due to fewer loans, more delinquencies and write-offs, and lower overall return on investments. While paying special attention to asset/liability issues should help to prevent such losses from being as bad as they could be, consider ways your lending policies could help to slow the growth of delinquencies, and review product pricing and sales penetration. You might be surprised at what you find! I entered a credit union that had an ancillary loan product line—credit life, disability, warranties, etc.—with sales penetration of around 20 percent. They were able to raise penetration to over 70 percent while lowering incentive costs.

There remain credit unions that do not charge late fees and/or still provide credit union paid life insurance on share accounts (and even on unpaid loan balances). Can the cost of these products continue to be borne by the organization in today's environment? There are many other potential product pricing issues within the industry, as well—any of which could be viable revenue sources. Tough decisions must be made with the benefit of the credit union as a whole outweighing the benefit to the individual member.

While there are a myriad of additional challenges and issues that should, and even must, be dealt with as a result of the economic times we are experiencing, I believe the three discussed here are key:

• a variable budget/plan under which asset/liability pricing is finitely managed;
• refinement in operational costs (process, procedure and staffing efficiencies) and
• improved sales penetrations and product offerings.

I believe, as well, that the recommended responses to each challenge have strong potential to help CU leaders fulfill their two key goals: serving members' financial needs while staying solvent.

Dennis Gibson, CSE, a former CUES member, is senior vice president of The Sequoyah Corp., Glen Mills, Pa., and Gladstone, Mo.

Read more about ALM strategies in our archive and in ALM Spelled Out—Second Edition.

 

Walking the Talk

By Mary Arnold

Earlier this week the Michigan Credit Union League announced a $10 billion "Invest in America" program designed to help consumers afford new cars, while at the same time helping General Motors cut its inventories. This is a shining example of how credit unions, working together, can impact not just their individual members but the American economy. In fact, it sounds like just what Gary Easterling, CCE, was thinking of when he wrote "Main Street in Crisis: The Credit Union Difference."

According to the league, Invest in America is "a partnership between General Motors and 1,200 Midwest credit unions [that] will offer credit union members supplier pricing on new vehicles and make $10 billion in auto loans available." The program is open to members in Michigan, Illinois, Indiana and Ohio--now through June of 2009. Credit unions in those states can send their members to LoveMyCreditUnion.org for more information.

In a visit to this site, I learned that through Jan. 9 members can save an extra $250, that "in most cases, you can combine current incentives and GM reward card earnings, and that there's "no haggling with salespeople, no having to go from dealer to dealer. Just click on Credit Union Discount From GM button to get cruising in your new car."

The pilot could be expanded to other states, and Chrysler and Ford have also been invited to participate. The program is being coordinated by Michigan league affiliate CUCorp in coordination with the four state trade associations and CUNA.

I'm currently shopping for a new car. Wish I could get in on the action, especially the not having to go from dealer to dealer part!

CU HARP: Will it Play?

By Mary Arnold

Since I left this comment on Friday about the Member Mortgage Relief Initiative, which a group of credit unions proposed to NCUA, the agency looks like it is serious about backing it. In a press release yesterday, "NCUA unveiled a new initiative aimed at assisting credit union members who are experiencing mortgage-related financial difficulties to preserve their homeownership.

"The Credit Union Homeowners Affordability Relief Program (CU HARP) would enable NCUA, through the Central Liquidity Facility, to work with credit unions and their members in temporarily lowering monthly mortgage payments. The CLF would provide credit unions with funds borrowed from the Department of Treasury at lower rates than otherwise available through private sources. In turn credit unions would pass the entire rate reduction to struggling low- and moderate-income borrowers. The credit union, in exchange for the reduced likelihood of borrower default on the mortgage, would also match the rate break, doubling the benefit to struggling homeowners." 

“My principal reason for advancing CU HARP is simple: The consumer must not be left out of the broader government efforts to mitigate the housing and credit market dislocations,” stated Chairman Fryzel. “CU HARP is an effort to foster a solution whereby the NCUA and credit unions work together to assist distressed borrowers.  It represents what I believe to be an innovative and practical use of federal homeowner assistance that will also benefit credit unions and the market. At the same time, the standards and requirements for CU HARP participation will be stringent and will enable NCUA to be responsible stewards of any public funds used. CU HARP will be a ‘win-win’ for all involved.”

As part of that win-win, the plan involves no spending of taxpayer dollars, something CUs can continue to feel good about. "CLF loans are made to credit unions on a fully-secured basis, and all advances received by the CLF will be repaid to the Federal Financing Bank (an arm of Treasury) with interest," the release explains.

NCUA's announcement comes on the heels of last week's change to the bailout plan, which eliminated CUs' possible use of TARP funding. Though, theoretically, being eligible for TARP placed credit unions on "equal footing" with the rest of the financial industry, most credit unions are already on higher ground, thank you very much, and eager to help their members--not to obtain taxpayer assistance.

To go forward, CU HARP must be approved by the NCUA Board, as well as the Treasury Department and the Board of Governors of the Federal Reserve, according to NCUA's release.

Initial funding would be $2 billion. What do you think? Does this have legs?

Mary Arnold is VP/publications for CUES.

Business Lending in a Tough Economy

By Jim Devine

More than 2,000 credit unions now offer member business loans for a total dollar volume of more than $20 billion. Most of these CUs initiated their MBL activities during the last five years.

For the most part, the CU industry has experienced very little difficulty with the performance of their business loan portfolios. However, many existing loans were booked during a relatively healthy economic period, where the majority of small businesses were performing reasonably well.

So have credit unions really been that good at member business loan underwriting and credit administration? Or have they simply been in the proverbial right place at the right time?

CUs will soon find out how good their initial business loan underwriting efforts have been and whether they truly possess the expertise to manage business credit risk in this very challenging economic environment. It will be imperative for CUs to monitor the operating performance of their small business borrowers to make sure they are maintaining a risk profile consistent with the CU's expectations.

A good business credit risk management system begins with a thorough and consistent approach to the underwriting process. Before approving a given loan request, a business lender must understand that particular small business—and the chemistry of its business model.

As part of this risk assessment process, the lender must be able to identify the critical cash determinants associated with this business. The lender must also clearly identify both the primary and secondary sources of repayment, along with any other business model issues critical to the going-concern performance of the business.

Lending policies should specifically identify how debt service coverage is measured. Most policy manuals describe a minimum coverage ratio in the $1.10-1.25-to-$1.00 range--in other words, the lender wants to see at least $1.10 in capacity to pay for every $1.00 of debt repayment required. But there are different ways to measure capacity to repay. All staff members involved in the member business lending effort should consistently use the same definition of debt service coverage in their underwriting efforts. Jumping around can create real challenges in trying to manage risk from an overall loan portfolio perspective. For this same reason, everyone in the lending foodchain should understand how to measure operating cash flow.

Once the underwriting process has determined that the prospective borrower's operating risk profile meets the CU's standards, the CU can move forward and approve the loan.

Now the real fun begins! In reality, the credit risks begin once the CU has approved and booked the loan.

The truth in lending is that last year's performance does not pay back the business loan you booked today. Future performance will ultimately dictate repayment capability.

Given this scenario, CUs must be in a position to monitor the ongoing performance of their business borrowers, compared to anticipated or expected levels of operating performance.

Good business credit administration processes are built on business model structure expertise. The process should be able to stress test critical cash determinants and detect any deterioration in a borrower's operating performance—in a timely manner.

The objective is to keep the risk profile of the borrower at or below the level that existed when the loan was originally approved. To continually monitor risk levels, CUs must develop and use a business loan risk-rating system.

If a borrower's risk profile increases beyond the profile in place when the loan was approved, the lender must be capable of taking action to address the reasons for the deterioration. The lender must also be able to modify the working relation with the borrower to accommodate the change in the risk profile.

The deteriorating condition of the national economy is inevitably going to put performance pressures on small businesses. CUs are starting to experience their first real challenges with non-performing small business loans. Senior management and MBL officers of every CU engaged in MBL must regularly reassess the condition of their MBL portfolios, as well as their business loan policies and procedures. The goal is to position the CU to appropriately manage business portfolio risks on an ongoing basis.

To deal with this risk management reality, CUs must make a commitment to continue developing their organization's business lending and credit administration skill sets. While many credit unions outsource business loan underwriting, regulators at both the state and federal levels have told the CUs in their jurisdiction that they are still ultimately responsible for making the final credit decision. They are also responsible for managing the loan on an ongoing basis while it is on their books.

Jim Devine is CEO of Hipereon Inc. and co-lead faculty of CUES' School of Business Lending.

Download the free CUES Webinar, "Analyzing Cash Flow," led by Jim and partner Bob Hogan. (At the log-in screen use "analyze" as your password.)

Read more thoughts from Jim Devine.

Things I Learned the Hard Way—Lesson 2

By Robert H. Halleck

In my first post, I talked about why "Your First Loss Is Your Best Loss" when it comes to collecting on bad debt and disposing of the collateral. Unfortunately, this is a much more frequent operation in credit unions of late. I drew on my insights from 35+ years in the financial services industry during which I often learned things the hard way. Here's another thing I learned:

Profit in a Depository Institution Is on the Liability Side of the Balance Sheet

Income is derived from loans but your net income–it's hard for a recovering banker to stop using the word profit—comes from your margin. Skillful pricing of deposits close to the balance point where your members are grumbling but not leaving will allow you to have far more prudent lending policies than those needed to stretch for yield because you wanted growth at any price. And we all know "hot money" is not a foundation for solid growth.

Another way to look at it is to remember the words of the old maxim, "If bankers have money, they will make loans. If they have more money, they will make worse loans, and if they still have money, they will make really bad loans." You are much better off controlling your growth and making loans you understand. Your members will thank you. Risk premiums have long since disappeared in the financial services industry. If that's the case, where indeed do your profits originate?

Robert H. Halleck, who retired in 2002 from a 35-year financial services career, remains vicariously involved in the industry through his wife, a credit union CEO.

Read Lesson 3.

Things I Learned the Hard Way—Lesson 1

By Robert H. Halleck

In my 35 plus years in the financial services industry, I learned some things the hard way and made more than a few mistakes more than once. I'd like to share some things that made an impression on me during my career. None of them is new and a fairly common reaction is, "I know that." So do I, but given the tenor of the times it doesn't hurt to discuss them again.

Some of my truths may not even be true all the time. As your general counsel is likely to say, "It all depends."

Finally, a word of caution. Some of these many comments may go against what you have long felt is right or wrong. Why not just let my thoughts slide into the back of your mind. You may find some change coming in your beliefs. It has always proved useful to me not to judge too quickly.

And now … Lesson 1:

Your First Loss Is Your Best Loss

You've heard this one before. Sure it's a cliché. Sayings become clichés because they are so often true. I know you did not go into the credit union industry to manage real estate or sell used cars. So, don't. Even good loans go bad after you have made them. Believe me, you want to get out sooner rather than later even if the collateral is expected to recover.

I took back an office condo from a duff construction loan. A speculator offered us $.70 on the dollar the day we foreclosed. My executive vice president said to wait because things would get better soon. Seven years later, we sold the last unit for a quarter of the original loan balance.

And then there was the crack house in downtown Washington, D.C., we thought we could refurbish rather than accept the ridiculously low offer. We ended up bulldozing the place and donating the lot to Habitat for Humanity.

In all candor, my experience tells me to dump repossessed homes and get on with life. That goes double for automobiles. In today's world they are underwater from day one.

Years ago repossessed cars weren't any better. My second bank employer ran the largest used car lot in northern Virginia with cars we had taken back. We would have been so much better off selling them at auction all the time. We even had one borrower steal his car off the lot using his duplicate keys. He sure loved the car but I guess not enough to make the payments.

Robert H. Halleck, who retired in 2002 from a 35-year financial services career, remains vicariously involved in the industry through his wife, a credit union CEO.

Read Lesson 2