Martin Breland has some advice for lenders: Make sure you have an online application with automated decisioning.
The CEO of Tower FCU is emerging from five years of organizational and technological change, taking a paper-based consumer and mortgage loan departments into the digital age.
Early results are promising: Decisions on loan applications used to take days, but now most members can get answers within five minutes by applying online with automated decisioning.
"The paper-driven process had multiple handoffs, which caused the process to be lengthy, particularly when volume increased," he said. Weaker applications-demanding more time and human interference-passed through the same funnel as stronger applications. The single funnel created "choke-points" throughout the CU's ten branches and the call center, said Breland.
"Any loan that required additional work to qualify the member was processed where the member applied," Breland continued. "At times, this resulted in decreased throughput capacity on the front line and also resulted in a delay in processing the high quality loans that needed no additional work. "We saw that this needed to be rectified," he added.
Tower launched CUNA Mutual's LoanLiner.com to drive online consumer decisioning in 1997. Prime Alliance Solutions, Inc. was brought in last year to facilitate automated mortgage lending.
Whereas automating the consumer loan process was relatively simple, "the mortgage process was particularly challenging because of the amount of information that was required for completion of a mortgage application," Breland explained
In addition to dressing up its technology, the 111,000-member credit union created its Central Underwriting Department to handle the new Internet lending initiative. "The centralization of underwriting paired with automated decisioning has allowed branch personnel to directly disburse consumer loans that receive automated approvals," Breland explained.
Reduction In Choke Points
Since automation, potential choke-points have been reduced from 10 to three, Breland said. Tower now receives more than 80% of mortgage applications and about 40% of consumer loan applications through its website. By 2005, Breland expects that automated decisioning and online applications will account for 50% of all loan approvals, up from 30% this year.
Productivity has increased, added Richard Brake, senior vice president of Member Services at Tower. "The improved technology has permitted Tower to originate significantly more loans, with about the same number of employees dedicated to the process."
Tower's net charge-off to loans was .10% for 2003. The loan to share ratio is maintaining at 72%, despite a 20% increase in deposits in 2003.
The mortgage lending staff processes about twice the number of loans since automation, said Brake. In 2003, Tower recorded about 2,200 mortgage loans through November, up from nearly 1,100 mortgages in 2002.
Mortgage loan volume increased to $340-million this year, up from $186 million last year, Breland said. Expecting a decline in refinancing volume this year, Breland projects $200 million in mortgages for 2004.
Automation is also making for increased consistency. "Better credit decisions are being made on the front end, keeping delinquencies low and loan approvals high," Breland said.
In fact, Tower seems ready to ride the next big mortgage wave. "Technology has allowed us to continue to process applications, even at times when application volume has increased dramatically within a short period," Breland said.
Tower still has lofty goals, said Breland: "We'd like to improve the timeliness of appraisals and automate the mortgage settlement process." This year, he expects that a typical mortgage from application to settlement will only take up to 15 days. Tower's efforts earned LICU Corporate FCU's Share Your Pride award, which recognizes innovative ideas that have had a positive impact on operations and member service.
