How One CU Has Used Tech To Increase Its Mortgage And Business Services

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KALAMAZOO, Mich.-A core system built to handle commercial accounts for credit unions is helping Consumers CU quickly process and profit from business loan participations as well as mortgage loan sales.

"We're earning really high premium income on some mortgage sales, averaging over a 2% margin," said Scott Sylvester, CFO and CTO at the $350-million CU here. One year ago, Consumers converted to Harland Financial Solutions' Phoenix Extended Financial Enterprise (PhoenixEFE), a real-time core processing solution integrated with specialized applications.

Consumers originated $61-million in mortgages last year and sold $38-million, Sylvester continued. "PhoenixEFE is pretty turnkey on mortgage loan sales to Fannie Mae and the Federal Home Loan Bank and provides all the necessary reporting and remittance for third-party servicing."

The software is also "systematic" on commercial loan participations with other credit unions, he said. PhoenixEFE technology makes sure Consumers abides by NCUA regulations that keep member business loans at 12.25% of assets and enables multiple participants on any single loan. Participations allow Consumers to "continue to generate revenue" and serve member business needs beyond the 12.25% cap, Sylvester explained.

Although Consumers sells and participates out loans, the CU continues to service 100% of its portfolio. "Our loan servicing portfolio is big, diverse and complex, and one of the biggest advantages of PhoenixEFE is that it's a single servicing platform," said Sylvester.

Delivering A Consistent Experience

PhoenixEFE can service any loan-consumer, mortgage, business, home equity-said Tom Berdan, VP-product management, Harland Financial Solutions. That way, Consumers can remain responsible for delivering a consistent experience to the member for the life of the loan, no matter who owns it.

Previously, Consumers didn't have the technology to service commercial loans, said Sylvester. "We were trying to stick a square business-loan-servicing peg into a round credit union consumer platform. It was inefficient."

When a loan payment is received, the PhoenixEFE automatically calculates the participating portions, populates all general ledger entries and sends remittances to participants, said Berdan.

The software automatically reconciles mortgage and business loan payments with the general ledger, Sylvester added. "Before, they were two separate systems. We'd have to collect and transfer payments in batch into the ledger," and then reconcile two systems.

An integrated, online cash-management feature is alluring to member businesses, Sylvester suggested.

Businesses Demand Flexibility

"A lot of the business accounts we've sold are contingent on online cash management integrated into online banking. The member business needs the flexibility to move funds from their local checking accounts to the parent company, for example."

Business product risk and pricing is easier to manage in PhoenixEFE, he said. "In a traditional core system, it's hard to price our products depending on the business. Now we have almost limitless options as to how to price business products. And for some businesses, you wouldn't want to offer certain features online because of risk. With PhoenixEFE, we can control the availability of features at the member level."

Consumers is interfacing teller cash recycling machines with PhoenixEFE, said Sylvester. PhoenixEFE tracks teller deposits and withdrawals at high-volume locations and eliminates the need for tellers to interrupt a transaction to walk to the cash vault.

Consumers' growth this year will be about 9%, "and we will budget for similar growth in 2011," Sylvester said. "Though this is not near our 20-year historical average of 20%, we're trying to temper growth a bit because earnings are stressed by regulation, assessments and the economy."

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