For Firstel FCU, this year will see the culmination of a resolution three years in the making: the "reinvention" of its entire lending operation.
"We decided we needed to take a look at the entire lending operation; at the very least, we certainly needed a way to improve our lending," said Harry Carter, CEO of the $205-million CU. "It doesn't matter what size you are, the minute you go from having one loan officer to two, you have a training and consistency issue."
Three Years of Review
Firstel has spent the last three years combing through its underwriting, parsing its lending criteria, and reviewing why loans were turned down. In 2002, Carter said, he hopes to see it all come together.
"We looked really hard at how to improve our underwriting and found that we really needed to improve on lending to more people. We had entirely too many turn downs, and in a lot of cases, these were members we knew, we knew they were good members and they were often times going and getting that loan somewhere else," Carter related. "Why weren't we making these loans when our competitors felt comfortable making them? We're not talking about subprime lenders.We had to get back in the game."
Carter came to Firstel about three years ago and doesn't know how long it had been since the credit union had evaluated its underwriting and lending criteria, he just knew it was time for some modernization.
"We had requirements where no one even knew why they were there or how they came to be there, but everyone was following those requirements to the letter, and if a loan just didn't quite fit, it was turned down," he explained. "We found there were a lot of little things in there that just weren't necessary. It seemed like the people who really don't need to borrow were the people we were always lending to."
While Firstel initiated this process several years ago, the faltering economy and the aftermath of the Sept. 11 terrorist attacks, make it all the more important that the credit union bring its lending reinvention project to fruition in 2002.
"We couldn't be satisfied with just getting our same, constant share of lending," Carter suggested. "Especially now, when lending has become so much more of a challenge. This whole process has been aimed at getting more than our share of the lending out there."
So far, the anecdotal evidence from staff indicates success.
'That's Made A Difference'
"They're very pleased with the loans they are now making that before they would have turned down," he related.
Firstel has been sending all staff that are related to lending and collections, as well as branch management, to Rex Johnson's University of Lending at Lending Solutions, Inc. "That has really helped make a difference," Carter noted.
One segment of lending that has proven particularly tricky-but is also particularly important-is unsecured loans.
"We need to get better at that, it's such an important part of who credit unions are because that is a risk unique to credit unions. No other sector of the financial services industry does this, other than credit cards, and that's a whole other animal," he offered. "It's a special kind of loan. But we need to work on it. Last month was the first month I've ever seen this, but every single charge-off we had was either an unsecured loan or a credit card loan. We need to be able to keep doing these because they are part of the credit union history, but something needs to change."