LOS Technology Cultivates Healthy Auto and Consumer Loan Programs at MVFCU
The Alaska State Fair in Palmer, Alaska, is well-known for its giant vegetable exhibits, including a world record cabbage that weighed almost 140 lbs. and pumpkins that regularly top 1,000 lbs.
Matanuska Valley FCU, also in Palmer, had similar goals five years ago: grow a large auto loan portfolio, according to Consumer Loan Manager Jaccie Gaines-Adams.
“Direct loans were dropping,” she recalled. “I’ve been with the credit union for over 20 years and when I started, we could offer a lower rate and capture those loans with refinancing. But the way the market has been, with such low rates, there wasn’t a lot of refinancing. Loans just stayed where they were.”
Indirect lending was the answer for the $508 million MVFCU, Gaines-Adams explained, because members were increasingly expecting the convenience of an indirect lending channel when they purchased new vehicles. The credit union had also recently merged a credit union in Hawaii, and saw an opportunity to increase loans and build membership in that new market. After shopping around for indirect partners and loan origination systems, the credit union selected CU Direct and its consumer LOS, Lending 360, in 2015.
“CU Direct lined up with our goals for current and future success in several areas, including partnerships with the same vendors we were using,” Gaines-Adams said.
Matanuska Valley launched its indirect lending program in February 2016. That first year, the credit union achieved rapid success, funding 315 indirect loans for a total of $8.85 million outstanding by year-end 2016. Indirect lending also produced a nice membership gain, raising net member growth to 4.29% in the second quarter and producing higher than usual numbers the entire year that were nearly double the peer average, according to NCUA reports.
In September 2017, Matanuska Valley began processing all of its consumer loans on Lending 360 as well. Following that conversion, the credit union achieved strong consumer loan growth overall, ending the year with nearly $100 million outstanding in direct and indirect vehicle loans.
Indirect auto lending remained strong during 2017, with Matanuska Valley funding a bumper crop of 600 indirect loans, and grew its indirect portfolio to $23.6 million. The credit union continued to have strong gains in 2018, increasing indirect loans outstanding to $31.9 million year-end 2018, and topping $500 million in total assets.
That loan growth – a 30% gain in total consumer loan volume – is due in part to Lending 360’s ability to streamline MVFCU’s lending process. The credit union’s former lending system didn’t offer automated approvals, so employees had to approve all loans manually. Members were required to apply for the loan, then wait to hear back on the approval and move forward with funding.
Now, loans are approved, closed and funded within minutes. “They’re dedicated to staying closely connected with members through the entire process to provide proficient service,” Gaines-Adams said of her front-line lending staff. In fact, Lending 360 was so unbelievably efficient, staff spent the first week on the platform calling to confirm that they could begin funding loans, she recalled.
“The time savings is priceless,” Gaines-Adams noted. “The staff was immediately impressed by the quick loan approvals. In addition, it streamlined our process for loan notes, and our lending staff was able to see the full application process, rather than faxing or emailing information back and forth.”
That efficiency boost is still performing well today. During March 2019, Matanuska Valley funded 65% of approved loans, which marks a big improvement over the credit union’s pre-Lending 360 days, when approval and funding required far more time.
The LOS also provides both better consistency and flexibility in underwriting. “The more we use the platform, the more flexibility we find,” Gaines-Adams said. “Being able to quickly change rates and underwriting guidelines, test changes and create new documents is excellent. The system has really exceeded our expectations.”
For example, she said, most loan rate promotions are planned out ahead of time. However, if the credit union wants to increase loan volume quickly, rates can be lowered in the morning and the promotion can begin immediately. “Rather than update rate sheets and send them to staff, we can just change rates and send out an email,” she explained.
Lending 360’s underwriting flexibility also provided a safety cushion for the credit union as it fine-tuned its indirect program.
“It’s easy to change a rule set and see it automatically applied. We use the system to drill down on approvals and make it tighter. Or, if it’s too tight, we can test a higher payment-to-income or higher DTI and apply it immediately.”
Employees did have to overcome a learning curve when the LOS was first implemented, because the credit union’s IT team had custom built its previous workflow checklist, which staff had memorized. Learning a new workflow, document storage system and how fields are populated took some time, as with any major change.
In fact, Gaines-Adams admits that even she was hesitant to make changes in the platform at first. However, CU Direct representatives and the customer care department worked closely with her to build her confidence.
“It’s great knowing there’s a knowledgeable team ready to help when needed,” she noted. Lending 360 delivered greater lending efficiency, improved member service and growth in Matanuska Valley FCU’s indirect and consumer loan programs, and overall loans.
“We would not have been able to achieve the success we’ve had without a solid partner in CU Direct,” Gaines-Adams concluded.