We are in the early design phases of a project to enhance how CU*BASE tracks written-off loans, recoveries, and charged-off loans, expanding on existing Write-off/Charge-off database and analysis tools. This recipe will preview some of the concepts and ideas we’re considering in the design.
Why We’re Doing This Project
- To allow for better recovery reporting via our 5300 Call Report tools.
- To improve our capabilities related to calculating net losses.
- To allow us to calculate a more accurate payoff amount on loans that are sitting in write-off status.
- To put another brick in the wall in our capabilities to meet future CECL challenges.
Ideas Being Considered in the Design
- Display more relevant information on account inquiry and update screens for written-off loans. Replace data that pertains only to current loans with data specific to loans that are in a write-off status.
- Create an easier way to handle partial write-offs, where a portion of the loan is charged off but the rest remains in a current status.
- Write a special account adjustment tool, dedicated specifically to the special types of adjustments needed for written-off loans, such as posting recoveries, adding collections expenses, etc.
- Design a technique for calculating interest due since write-off. This wouldn’t involve daily accruals; rather, we would calculate, on the fly as needed, an accurate payoff amount that includes interest due since payoff, fines due, and other collections expenses (such as attorney fees, collections/repo fees, etc.).
- Collect additional data at the time of the write-off, as needed to support the new calculations.
Methodologies Being Debated
- Expand MEMBER5 and MEMBER6 tables? (Adding more special-use fields that would appear in the tables for all loans, but be used only for write-off and recovery purposes on written-off loans.)
- Create a new set of MEMBWO5 (for Write Off) and MEMBWO6 tables just for written-off loans? (In other words, removing loan accounts from MEMBER5/6 and moving them to these new tables instead.)
- Expand the write-off/charge-off database and combine that data with existing MEMBER5/6 data for a more complete picture? (Make use of this separate architecture to allow other loan processes to continue as now, but giving us new data to work with for new analysis and processing tools.)
Expanding the MEMBERx tables has fairly large ripple effect and might result in unintended consequences. Creating new tables would eliminate that ripple effect but create a different one, as we have to figure out where existing processes would need to start looking not only at MEMBERx tables but also the new MEMBWOx tables. The idea that has the most promise now is to greatly expand the existing database used for written-off and charged-off loans, adding new columns to existing tables and even creating new data tables that provide the information we’ll need for new analysis dashboards, calculation routines, reports, and the like.
We Want to Hear from You
At their meeting on April 11, 2019, we introduced our ideas to members of the Accounting Top Priorities focus group, and several of these credit unions are assisting us with their ideas and feedback as we move forward.
But we’d love to hear from you as well. Give us your feedback, ideas, and suggestions so we can consider them as we continue to shape the final design. And if you’d like to talk to someone, reach out to the chefs for this recipe: Randy Karnes and Dawn Moore.