Thrift Taps Net to Expand into Consumer Finance

A small Chicago savings and loan is transforming itself into a consumer finance company via the Internet.

Until a few years ago, $600 million-asset Avondale Federal Savings Bank was a typical thrift: Its main business was to make home loans to customers through its branches.

But over the past four years a new management team, many of whose members had worked for Household International, has gone about using the thrift's federal charter to make Avondale into a multistate finance company.

Most recently, Avondale introduced home equity loans for subprime borrowers at a fat margin of 4.5% over the prime rate. The loans are made in 30 states by wholesale brokers linked to the thrift through the Internet.

"I don't want to open branches in every state," said senior vice president Michael A. Kinane, but Avondale wants to be present "anywhere there is a buying occasion for the consumer."

For Avondale, the solution has been to link up with other businesses, such as wholesale brokers, through the Internet, Mr. Kinane said.

It is using FIS Corp.'s EasyLender software, which allows the brokers to send loan applications over the Internet to Avondale.

The software's other functions include retrieval of title reports and appraisals.

An application can be tentatively approved, subject to an appraisal, within 27 seconds of receipt over the Net, Mr. Kinane said. Avondale relies almost entirely on its own credit-scoring system.

FIS, based in Orlando, processes the home equity loans, sending out monthly payment statements to borrowers.

Mr. Kinane said Avondale wants to use the Internet next to hook up with the furniture and jewelry stores for which it finances private-label credit cards.

The idea, he said, is to also sell home equity loans to people who apply at furniture stores, for example, for unsecured loans to pay for new furniture.

Down the road, Avondale wants to sell its home equity loans through home improvement companies. A salesman for a siding company, for example, could submit an application "via laptop and wireless communication and get the answer right back at the kitchen table," Mr. Kinane said.

Avondale is also developing a scoring model for credit decisions on first mortgages sought by subprime borrowers.

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