Posted by Mr. Bill Meyer, Communications/Public Relations, Credit Union Direct Lending on 9/6/2018

 

When Justin Olson joined Trailhead Credit Union in 2013 as vice president of member services, the credit union was facing an uphill climb.

 

With a loan-to-share ratio of just 59 percent and on a steady monthly decline, the $120M credit union was only originating around $1 million per month in 2013. That wasn’t enough to improve that key measurement, and the Portland credit union was losing business to lenders who were providing a better customer experience.

 

Trailhead had big plans to rebrand the credit union, recruit new members and grow loans. However, Olson said inefficient processes stood in the way of that growth and his team’s ability to provide excellent member service.

 

In particular, the loan process was extremely inefficient. Three different platforms were required for employees to take a loan from approval to funding.  “They had to do the application on a worksheet, hand deliver it to an underwriter for approval, then go back to their desks, type all the loan docs by hand, print them out, get signatures and fund the loan by right clicking,” Olson recalled. “It was a very long process. If you were doing it start to finish, even as quickly as possible, it was 45 minutes to an hour.”

 

When Trailhead went shopping for a new loan origination system, Olson was disappointed to find that most solutions were too expensive for his shop. Then, the credit union’s CU Direct representative introduced him to Lending 360.

 

CU Direct’s LOS was a perfect match for the credit union’s growth goals. The biggest benefit has been Lending 360’s seamless integration with Trailhead’s Symitar core, which has drastically improved efficiencies.  “Now, staff can click export and the loan is automatically onboarded onto our system,” Olson said. “No more manual entry. Not only is the process more efficient, it’s also cleaner. After all, the more steps involved, the more potential for errors.”

 

Since implementing the system, Trailhead has increased loan originations by 79%, to nearly $2 million in new loans each month. And, the credit union’s LTS ratio has improved to 70%.

As a result of Lending 360 and other process improvements, membership has climbed from 4,800 members to nearly 9,000 in just five years. Olson said he wasn’t necessarily thinking that the LOS would grow new members, but the system’s new account opening platform has made the new member process a more efficient experience.

 

It’s also made it a better experience, he said, because the efficiencies have allowed staff to take a breath while processing new members and their loans and allowed them to devote more time to delivering excellent service.

 

Trailhead employees also like the system’s layout. “We use Outlook and Microsoft, so Lending 360’s format is very familiar and consistent with everything we do,” he said.

 

The credit union has customized Lending 360’s workflows, automation, decision engine and cross selling. In fact, Trailhead has customized the system so much, it even uses the consumer loan platform to process real estate loans. The credit union uses the LOS to process 7-year balloon mortgages and 15-year fixed refinances.

 

The flexibility of the LOS has worked well with Trailhead’s local niche market: floating home loans. Floating homes are popular in the Pacific Northwest because they offer affordability and relief from urban space restrictions and rising sea levels. Floating homes aren’t the same thing as houseboats. They’re connected to city water and sewer systems, and even though they can be moved, they are permanently moored. That means they can be financed with traditional real estate loans.

 

From July 2015, just before launching Lending 360, through May of this year, the credit union has grown its floating home loan portfolio $9 million.

 

About 23 percent of Trailhead’s outstanding loans are floating home loans. Another 14% of outstanding loans are 1st mortgages, with 20% in vehicle loans, 6% in HELOCs and the remaining in unsecured.

 

With such a strong emphasis on real estate lending, it was important for the sake of efficiency that Trailhead was able to utilize Lending 360 to process a significant percentage of its home loans.

 

With improved efficiencies in place, the credit union is not only lean, it’s also a force to be reckoned with in its market, even when going up against large lenders.  “We don’t have all the layers of approval that bigger shops do, so we are actually more efficient,” Olson said. “We’ve received a lot of referrals because members liked how quickly we got back to them and processed the loan. And, because staff isn’t manually entering loan information into the system, they can provide more responsive service to our members.”

 

Olson also said he appreciates CU Direct’s CUSO structure, which creates a culture of partnership, rather than a typical vendor to customer relationship. Feedback from credit unions is welcomed and used to improve the system, he noted.

 

Today, the credit union is experiencing 73 percent loan-to-share ratio and has seen its assets grow from $95M in 2013 to $120M in 2018. 

 

Now that Trailhead’s lending and new account process is more efficient, the credit union is reviewing its loan products with an eye toward streamlining its offerings to allow for expansion. Trailhead is also gearing up to implement online eDocs imaging, increase its indirect lending, revamp its HELOC program and launch a balloon auto loan program.

 

The success that Trailhead has had, and the growth expectations the credit union has for the future, exemplifies the role that the right LOS plays in improving lending programs.  Lending 360 has exceeded everyone’s expectations, Olson concluded.

Categories: Business Partners, Financial & Auditing, Strategic Planning & Consulting, Technology Consulting & Compliance
Posted by Christopher Uhl, Senior Asset/Liability Management Consultant, Catalyst Corporate FCU on 8/30/2018

There’s good news for the future of credit unions: our membership base is getting younger! But relative to national averages, we still have a long way to go. So, at least for now, credit unions must prepare for the possibility of sizeable deposits leaving their institutions.

According to this CUNA study, the average age of credit union members in 2014 was 48.5. However, in 2017, that number dropped slightly to 47. While that may seem like a win, the average age of all Americans is 37.8 years old. Realizing your members are a decade older than the average American might give you a few gray hairs.

What’s a credit union to do?

Step 1. Keep an eye on the weighted average life of your deposits.

This is a key assumption used in interest rate risk modeling. Organizations like Catalyst Corporate offer a different perspective in calculating the weighted average lives of deposit accounts, going beyond surface data, like balance and term.

The difference is in observing each individual account as it matures and eventually leads to either a closing period or a current balance. After acquiring the overall terms, the weighted average is calculated using the historical decay rates.

Step 2. Take all open accounts and develop a weighting factor based on age and balance. ,

This will help determine just how much impact the credit union will absorb if member heirs elect to take their newly inherited balances to other institutions.

In other words, the actions in Step 1 will get your credit union off to a great start, but they won’t tell the whole story. Catalyst Corporate’s analysis shows the average member age at many institutions is between 50 and 69, considerably older than industry surveys suggest. This aging demographic may be “exiting the population” sooner, rather than later, at least according to the IRS data …

Step 3. Use historical data, as well as future expected data, based on your membership demographics.

This allows your credit union to more accurately match loans to deposits and offset any pricing or timing mismatches. It also gives the credit union a clearer picture of its membership base and reflects realistic expectations of weighted average lives in their interest rate risk calculations.

All Done?
No method of non-maturity deposit modeling is perfect. But watching how your actual accounts behave, along with considering the likelihood of retaining those deposits after your membership “transitions,” will give your credit union tools to accurately model and plan for a more realistic outcome.

Categories: Business Partners, Education & Training, Strategic Planning & Consulting, Succession Planning
Posted by Alison Barksdale, AVP of Mktg, CU Members Mortgage on 8/28/2018

We saw the movie Incredibles 2 along with millions of other families. Among the laughter and adventure was squeezed a quick lesson that got my attention.

I won’t go into great details, but one character Evelyn Deavor had an interesting conversation with Elastigirl that struck me.  She claimed, “consumers aren’t interested in quality, they fall for ease every time.  It’s all about convenience.” Presumably, that was how she would wipe out superheroes for good – using people’s weakness to be convenienced.  This little tidbit stopped me in my tracks.  

It’s not surprising to me what she said.  Actually, we are a society addicted to convenience and if you don’t think you are, just recall the last time you walked to your TV and changed the channel.  Nope, that remote control was the first thing you looked for when you entered the room.  Convenience.  It’s not going away. The thing that tripped me up is …will it all dwindle down to the easiest sales experience wins?

First, let me tell you that as long as credit unions are in business, quality will always be a factor…thank goodness! It’s people helping people, not machines helping people or computers making it simple - that we stand on.  It has me wondering though, is it enough?

Take a look at mortgage lending and the changing process flow…automated underwriting, swift online mortgage applications, day one certainty, and the list goes on.  With these in mind, will convenience defeat the ways of a good underwriter, loan officer, or processor?

I’m going to go out on a limb though and say no.  When automated underwriting began all those years ago, everyone said “oh I’d really hate to be an underwriter right now. They won’t have jobs soon.” And, more recently we’ve heard the same about the loan officer and various other positions throughout the mortgage process.  We all still have underwriters and loan officers and a slew of other necessary professionals to close a loan.

While creating convenience is a necessity to compete, it isn’t what is going to keep members and it isn’t what is going to grow your membership.  Convenience, while necessary, is common among all financial institutions, lenders and companies across the globe for that matter.  From ATMs to online mortgage applications no matter what aspect of your business, you have to be convenient.  Yes, we get that aspect of it, but there is so much more to it. 

My point, if all things are created equal and everyone has the latest and greatest technology, it’s going to be your people that make the difference.  It’s going to be the way they connect with the consumer and the way they empathize with them.  It’s going to be how the staff problem solves or how they work together to make a difference in communities.  It will never be just about convenience. It will always be the extra difference your people make. 

I’m honest in realizing that only those who can afford to compete in the digital world of convenience, can continue on.  If a credit union can’t afford to compete by providing the latest technology solutions to its members, then maybe they won’t survive. But, I will say that partnerships with the right vendors might make a big difference.  Not everyone can buy the technology themselves, but if you can partner with the right people to ensure you have the right tools to assist your team, maybe the credit union becomes the superhero in the story.

If your credit union has struggled in finding the right technology or staying on top of the changing technology in mortgage lending, talk with our team.  CU Members’ is positioned to compete with the latest tools, but we’re also positioned with the right attitude in assisting members.  We believe in doing the right thing, and that’s what’s kept us going for more than 35 years.  You are not out of the competition because you don’t have the right tools, you simply need to have someone to help arm you with the right gear. 

Categories: Business Partners, Sales & Service
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