NEW ORLEANS-If lending is to make any kind of comeback in the next year, credit unions will need to find a way to deal with the growing compliance burden, and do a better job of keeping the loans they already have.
A number of CU lending execs lament that dealing with compliance is stealing time from being more strategic with loan programs. Credit Union Journal talked with lending officers from across the country during the CUNA Lending Council's 2011 Annual Conference here.
"(Compliance) is taking away from our focus on lending strategies," said Bill Vogeney. What's making matters worse, added the SVP at Ent FCU in Colorado Springs, Colo., is that credit unions need more time than ever to make loans work. "Trying to find the volume, the niches...you can't just use the old tactics. You have to analyze what is going on with your membership, market, and try to find pockets of business." Credit unions, too, need to invest in new employee skills sets.
Vogeney, vice chair of the CUNA Lending Council, said Ent has eight to nine lending initiatives that will take it into 2013, but none are "home runs. We are a $3-billion shop and I don't think any of these ideas, on their own, will generate a huge amount of additional loans a month. But together they will bring about $10 million a month and $120 million a year. We are scratching and clawing for every loan."
Vogeney and Aaron Bresko, VP of lending at the $9.5-billion BECU in Tukwila, Wash., told Credit Union Journal that credit unions need to also be smart about protecting the loans they have from aggressive competitor programs. "That is huge," said Bresko, chair of the CUNA Lending Council. "We have to get better at selling, and not just new business but retain loans before the member goes to refinance the car or home somewhere else."
Vogeney said Ent has put in place a new process to protect its loans. When the credit union quotes a loan payoff to a member or car dealer, it responds with a counteroffer to the member. "We tell them, 'Don't refinance with a bank.' We'll do a loan modification on the spot and they don't need to sign anything. That is saving us about $1.5 million a month. Now that doesn't solve all of our problems, but that is a million-and-a-half dollars of loans we don't have to make."
The New Burden of The CFPB
But making the time to devise and institute new lending tactics will continue to be challenging, as the new Consumer Financial Protection Bureau is expected to bring down even more restrictions and requirements, attendees agreed. Some discussed CUSO solutions and others automation. Mike James, COO of Lending Insights in Ontario, Calif., noted that credit unions have to lean on technology. "If you don't want to hire, you have to automate and credit unions should get started now or be behind the curve, because the Consumer Financial Protection Bureau is going to bring a lot more rules down."
Dean Harris, AVP of consumer lending at the $575-million St. Mary's CU in Marlboro, Mass., said the use of automated loan origination systems has allowed his credit union to attempt to keep place with compliance demands without hiring additional staff. However, he pointed out that the credit union's AVP of mortgage lending spends a large amount of time addressing compliance. "That makes it harder to do our main job of helping members get the loans they need."
But Bob Brady, VP of Idadiv CU in Nampa, Idaho, has dealt with the growing regulatory burden a different way. Instead of automating or hiring staff, his $44-million credit union has stopped doing mortgage loans. "We were doing about three to four a quarter and every time one came in it was like a brand new experience for us-how do we comply with Good Faith and Truth in Lending? Because of concerns about being in compliance, it was safer to outsource loans."
The credit union now refers members to a local mortgage company that is not affiliated with any bank. "We don't want to lose our members," said Brady, who noted that the credit union is discussing adding automated loan origination to someday be able to bring back mortgages.
BECU's Bresko advised that if credit unions don't have the resources to closely analyze their membership data and market situation to make more loans, partners can help. "There are credit bureaus, consultants, and other companies to lift the burden off the credit union without having to hire. Maybe you have a vendor you are already using who would assist for a nominal fee."
