ELGIN, Ill.-More credit unions are outsourcing lending activity to reduce human resources costs and allocate some of the loan team to other duties.
That's what Lending Solutions, Inc. (LSI) has learned this year as the company's credit union business volume has increased by 27%.
"In August we processed 40,000 loan applications in one month for the first time in our history and that followed record months in June and July," said Bill Hultstrand, manager of marketing and communications. "We believe the increase is coming from credit unions that are choosing a different channel to process their loans."
Hultstrand said LSI came to that conclusion because loan volume at credit unions is not up this year. In fact, latest CUNA numbers suggest CU loan volume is tracking for negative growth in 2011.
LSI had forecasted for 7% growth for its business this year, said EVP Dave Brooke. "But we have seen another 20% on top of that. A lot of it is coming from our existing customers. The primary reason, we believe, is credit unions are trying to manage their costs better."
Shift In Expense Structure
Brooke contended that credit unions are shifting their lending expense structure from fixed to variable. "When our relationship managers visit with our clients they are finding CUs are cutting back on staff and putting a moratorium on hiring. When times are tight and the income is not there, changing from fixed costs on their books to moving loan originations to us, a variable cost, helps the credit union adapt to shifting loan demand. When business is down their costs go down. When business is up they pay us, but they also bring in the business to cover those expenses."
The current financial environment also has CUs needing to shift their internal resources to other duties, observed Brooke. "Some of the people that were handling the lending activity are now doing other things. I don't know if that is a result of the Durbin rules, but what I do know is that credit unions still have assessments to deal with and every year margins have gone down and that is squeezing credit unions."
Other CU lending trends Brooke has noticed:
• Indirect lending is up. "We are seeing more car loans coming in via the indirect channel."
• Auto loan recapture is increasing: "The interest is really there in credit unions using our outbound services to do auto loan recapture."
• CUs are being more aggressive: "They are not just opening their doors and waiting for members to come in. They are going after the business. We can see this from a marked increase in our outbound projects."
