COLORADO SPRINGS, Colo.-Could a return to manual loan underwriting in 2009 be a key to lending success.
Bill Vogeney believes it may. Vogeny, secretary/treasurer of the CUNA Lending Council and senior VP/chief lending officer of Ent FCU, expects 2009 to bring a return to more manual underwriting.
"Recent history has shown that perhaps lenders relied too heavily on automated lending decisions," he said. "Right now our B loans [640-679 FICO scores] are performing as well as our A loans [680-719 FICO scores]."
The reason, Vogeney explains, is because "a human set of eyes reviewed those requests."
"Like the pop saying, '50 is the new 40,' I think 720 will become the new 680 [FICO score] as banks and auto lenders continue to tighten their credit criteria," he added.
Vogeney believes that the reason many lenders are having problems with their 680-719 portfolios is because those borrowers were more likely to use credit cards and home equity borrowing to consolidate, he said. He also expects CUs to lose some of the market share gains they had in mortgage in lending in 2008.
"If we continue in a very low rate environment as a result of a flight in quality in investments-purchases of the 10-year treasury-and the Fed's decision to purchase mortgage-backed securities, credit unions will struggle with the ability to keep up with financing requests," he said. "I hope I'm wrong with this prediction."
On a positive note, Vogeney does expect credit unions to continue to earn public praise for their efforts to help members-through sound lending, loan modifications and superior service, he said. "Losses in consumer lending for banks will cause less rate competition for credit unions also, making us more competitive on rates than ever," Vogeney said.
