Do Not Hide Out. The Importance of Clear and Direct Communications and Follow Through

I was talking to a banker yesterday representing a sizable bank with a dedicated workout department, Special Assets they call it, and she commented about a particular borrower whom they were reluctant to give us a workout opportunity, let alone a resolution. I went to speak with her personally as her position was quite resistant and thus unworkable, something I had to overcome.

After talking, she explained that this borrower refused to talk with us, would not answer his calls, would not provide appropriate paperwork, financial reports or even an explanation of his intent. The file had been passed around the room to many different workout officers and no one could reach him or gain any level of participation and cooperation. They had offered workout opportunities and wanted to help him resolve his issues and default with them, but to no avail.

Thus they commenced foreclosure. Upon the borrowers receipt of foreclosure notice, he then reached out and called the bank. Understandably, from their perspective, they now would not speak with him and referred him to their council who simply explained he was being foreclosed upon.

At this point he sought out professional help, us and I got involved.

I was getting long with the banker and she further explained that if the borrower refuses to cooperate, when they then enter the legal process they too will now refuse to cooperate. She explained that the workout deal they would have done before, which was very reasonable, is off the table, not available because of his failure to cooperate when given an opportunity. Their intent was to now grind him down and take what they can get, even greater losses.

Apparently their deal that was reasonable before was no longer acceptable to them now because they were emotionally upset and wanted to punish the borrower even at their own loss. Sounds silly yes but very true. Bankers are also emotional beings as so many business people are. Emotion or ego clouds the decision making process and supports bad decisions, not good ones.

They preferred to now punish the borrower rather then finally settling. Not unusual, I spend much time calming the anger of disgruntled lenders and workout officers, and they all say the same thing, They are angered by the avoidance and lack of cooperation and participation thus they withdraw their reasonableness and prefer to simply make them pay despite their inability so they foreclose and liquidate spending more and getting less, all in the name of justification because the borrower ignored them.

Silly? Yes! True? Yes!

More fortunately I am able to deal with this as I spend the time to create trust and respect between myself and the banker, creating a working relationship and restoring the lost trust the borrower destroyed.

The net result was and always is that while the banker remains angry with the borrower, the banker is NOT angry with me and I therefore can manage to move them back into a negotiating stance as I, the third party, am reasonable, trustworthy, respectful, cooperative and committed to the banks success, and my clients debt workout and resolution.

It works well and supports two conclusions.

1. Communicate effectively and respectfully, failure to accomplish this simple task is fatal.

2. No matter what, the banker usually has some ire with the defaulting borrower as in their eyes the borrower breached his/her word. We, as third parties, gain much more traction and respect then the borrower can and thus we are more successful in gaining the results we need.

All to frequently we hear borrowers in default exclaim "...but I offered them that long ago and they refused and now they accept from you? and even achieve deeper discounts, how does that happen?"

Simple, I have credibility, the defaulting borrower does not.

The lesson, respond intelligently and effectively do not hide, or fail to cooperate. Hire professionals to represent you, we will do a better job and achieve better results.

It works, do it.