Six years, several technology vendors and a massive reorganization later, Michigan State Employees CU has doubled its loan volume reduced its lending staff and loan production costs and have cut loan approval time down from days to seconds.
MSECU VP-Lending Jim Dexter chalked that success up to a three-pronged approach that included an investment in loan decisioning technology as well as well as a change in some of its loan policies.
"We moved from closed-end to open-ended lending and engaged in a massive re-engineering of our loan department," said Dexter, who also gave some of the credit to moving to Aftech's Advantage client/server core processing and loan decisioning module. "Our new philosophy is to do as much business over the phone as possible, instead of what we did in the old days, when people would line up in the lobby waiting to do business with us."
As recently as seven years ago the credit union had a $285-million loan portfolio; now it's at about $442 million.
"A lot of what has happened has to do with product training," he explained. "We're taking the loan officer to more of a consultative status. We brought in an outside audit firm and set up a team with people from every part of the credit union to change the complexion of how we do things. It was about changing the mindset, training and giving employees the confidence to do things differently."
As part of that process, MSECU rewrote job descriptions for a number of positions and expanded who was authorized to close a loan. "Now, if the loan officer isn't available, and the manager is sick and someone else is on vacation, the head teller can do it, for example," Dexter commented. "There is always someone who can serve that member."
Turnaround is now significantly faster.
"We had gone to Aftech's loan origination platform about seven years ago, but we looked at a number of other providers for some of the other pieces," he related. "We were working with a couple of other vendors and ultimately decided to leave those other vendors and go with Aftech's loan decisioning module. And we're rolling that out now. Through Aftech's agreement with Experian, we are the only financial institution in the country that can receive credit reports on an Internet basis. It used to be we'd wait 10 minutes or more for the credit report. We're down to five to 10 seconds, and that credit report is the biggest single factor in getting a loan decision. On more involved loans, like home equity loans, we're looking at five minutes at the most."
MSECU has now doubled the size of the average loan, along with doubling the number of people able to take loan applications.
"We're incorporating our loan officers into our member contact center," Dexter reported. "With the loan decisioning module, about 60% of loan decisions will just pop up on the screen by the time the interview is over. We've taken three of our loan officers who were really credit analysts, and now they go over the applications that get referred back by the loan decision software."
A cueing system allows anyone in the member contact center to serve a member as if they were the initial contact all along, Dexter added, saving members the hassle of having to re-explain their account history every time a new person answers the phone.
One result: a "massive renovation" to its call center. "We're in the midst of a revolution here, really," Dexter offered. "It is very competitive out there. You look at the banks, and they can spend $3- or $4-million and not a bat an eye; we can't do that. Our recovery time (in which MSECU expects to see a return on its investment equal to the initial outlay) is a year, and we're ahead of the game."
While the credit union continues that tweaking process, MSECU is holding off on an all-out marketing effort to promote the contact center and the seconds-long loan approvals until staff feels like they've gotten every possible bug out of the system. "We want to make sure it's running smoothly before we promote it, said Chris Day, MSECU's marketing officer. "We want to ensure we can handle the volume before we start driving people to it."
For CUs considering overhauling their lending processes, Dexter offered this advice:
* Don't be afraid to seek outside professionals to help you through the re-engineering process.
* Involve staff from a variety of departments to ensure buy-in and to be certain the way changes are made in one area don't hamper another area.
* Don't be afraid to let staff come up with ideas.
* Make sure your in-house experts are involved so that consultants who might not be aware of all compliance issues don't get "carried away."
* Recognize that when you give your staff free rein to dream, they'll start looking at the way the credit union does other things, too-it's a snowball effect, and it can be a good thing.
