Houston, We Had A Problem
After burying the hatchet with local car dealers and automating its indirect lending program last year, one credit union here has funded approximately $73 million in loans.
Johnson Space Center Federal CU (JSC FCU) uses indirect lending technology that allows loan officers to make quick decisions about loan applications-the $667-million CU has funded 3,000 loans since April 2003, according to Thomas Hast, VO-marketing and indirect lending at JSC Federal.
"And here's the best part-we do this with a staff of three," Hast added.
After the credit union outgrew its three-year practice of buying indirect loans from a third party, JSC FCU started using a lending platform called SAIL Indirect. SAIL is provided by Austin, Texas-based Teres Solutions, which develops software for lending institutions.
Speed Is The Key
Speed is key to the success of JSC FCU's program. "Indirect lending is fast-paced because we are up against multiple lenders with automated decision engines that give approvals almost instantaneously," Hast explained.
The CU's venture into indirect lending hinged not only on technology, but also on making amends with auto dealerships. JSC FCU-like many other credit unions-had soiled its reputation with some 50 local car dealers, Hast said.
"When I first started approaching auto dealers, I was shocked to find out what they really thought about the credit union," Hast said. "There was at best an adversarial attitude. And the feeling was mutual."
Hast believes that credit unions need to cooperate with auto dealers-the "gatekeepers of our industry," he said. "Dealers decide where the loans will go. It is in our best interest to partner with dealers. That way, the dealer gets added sales as a credit union Preferred Partner, members get the same rate at the dealership as they would get at the credit union, and we get loans."
To make dealers happy, JSC FCU had to change its ways. One step was to start using an automated indirect lending platform. "Houston is a very competitive auto market," said Hast. "No dealer in our area will work with an institution that cannot compete in a timely manner and via the modes the dealer is accustomed to."
Now, loan application data, credit reports and notes are organized within SAIL's networked-based system can be accessed anywhere inside or outside of the CU.
In addition, "technology speeds the process by eliminating the need for multiple data input," Hast continued. Auto dealers can collect application data at the dealership, and the system automatically transfers the data to SAIL's decision and tracking software.
Time To Check Facts
JSC FCU then automatically sends loan decisions back to the dealership via DealerTrack's web-based, dealer-to-lender platform. Next, contracts and supporting documents arrive at the 71,000-member CU and the loan is funded with a few mouse clicks. Finally, the loan is instantly fed to JSC FCU's host system.
"In essence, the automated process gives the employee more time to do the important fact checking and analysis work that we want them to do," Hast said.
Despite the fact that JSC FCU had to shake hands with local dealers, the CU's credit terms have remained stringent, with an average funded Beacon score of 745 and qualified for A+ credit, said Hast. "We established decision parameters that are tougher than loans made at our branches."
Currently, more than 60% of JSC Federal Credit Union's new loan volume goes through the indirect lending channel, added Hast. "We have an extremely efficient operation that has produced results beyond our expectations."
Hast will soon escalate the system's efficiency by incorporating automatic decisioning and initiating and by tracking electronic checks for funding.
For more info on this story:
* JSC FCU at www.jscfcu.org
* Teres Solutions at www.teressolutions.com