The Three Biggest Issues When It Comes To Increasing Lending Volume
LAS VEGAS-Three issues dominate the credit union lending space: a search for loan growth, portfolio problems and regulations.
That was the message from Aaron Bresko, VP of lending for Tukwila, Wash.-based BECU and chair of the CUNA Lending Council.
"Consumer confidence is the No. 1 issue," he said. "Credit unions have money to lend, but consumer demand is low and underwriting standards have gone up. People are saving more than borrowing right now, leaving credit unions to try to attract volume from a smaller market.
The second-biggest problem, Bresko continued, is balancing loosening lending standards with safety. "Several credit unions, BECU included, made changes three years ago. But now it is time to review performance and look at underwriting standards to look for opportunities while mitigating risk."
Asked what is the best strategy he has heard recently to boost lending, Bresko pointed to one CU that has formed an outbound sales force that makes informational calls to the membership. These calls are not necessarily just to sell loans-the representatives discuss each member's unique information and ask if the member is interested in refinancing loans with the CU. "The important point is the sales force is promoting the credit union's products and services," Bresko observed.
On the regulatory front, Bresko warned that several aspects of the Dodd-Frank financial reform bill passed by Congress in July still remain unknown.
"We are waiting for that shoe to drop," he said. "In 2011 we don't know what is coming, but we know there will be more impact on credit unions. There could an impact from the Dodd act, or there could be new consumer protection laws. The Lending Council's regulatory committee is monitoring everything coming down the pike. That is our largest committee and we need every one of them."
CUs still are adjusting to the regulations that have been heaped upon them over the last 15 months, Bresko noted. He said the "glass half-empty" perspective is the regulations are a burden with which credit unions must comply, while the "glass half-full" view is "a lot of the impact and intent of these regulations was to put in things that credit unions already did. So other than making changes in wording, credit unions already were more consumer friendly and now banks have to compete on our terms."
Bresko quickly added he did not wish to "minimize" the impact of compliance, because the time spent making changes to disclosures "takes time away from other projects."
On a brighter note, Bresko said BECU is forecasting an increase in consumer lending in 2011 due to a pent-up demand for auto sales. Management believes there will be a slight decline in mortgages, simply because refis have been coming in at a rapid pace and rates eventually have to rise.
"The Pacific Northwest is doing OK on jobs, unemployment is about 9%, or slightly below the national average," he said. "We are looking for opportunities to lend because we want income from non-fee sources."