Enlightened Lending

Award-winning CUs have a strong vision for lending success.

January 20, 2012

Winners of the 2011 Excellence in Lending Awards turned their vision into results by developing new products, revising underwriting policies, and streamlining operations.

Sponsored by the CUNA Lending Council and CUNA Mutual Group, the awards recognize credit unions in four categories: outstanding consumer lending (less than and more than $250 million in assets), mortgage lending (less than and more than $250 million in assets), business lending, and serving members of modest means.

Interviews with the five Excellence in Lending Award-winning credit unions yielded this sage lending advice:

  • Ask for more from vendors. Demand customized products and services to meet your needs.
  • Implement changes in manageable stages. Resist the temptation to fix every problem at once.
  • Match incentives to performance. Require employees to meet minimum expectations before incentive payments kick in.
  • Reach members using their preferred channel, whether it’s the branch, telephone, website, or mobile phone.
  • Understand your market. Determine what practices and products will make them feel welcome and meet their needs.
  • Be tenacious. Don’t allow setbacks to prevent you from pursuing worthy goals.
  • Help applicants gain approval. Flexible underwriting policies, financial education, and personal service create positive results.
  • Don't settle for “good enough.” Look beyond “business as usual” at every stage of the lending process.

Double win

Latino Community Credit Union in Durham, N.C., achieved a rare double win in 2011 for both the mortgage lending and low/modest means award categories.

Keys to Success: Latino Community CU

Offers a full line of financial services to meet the needs of the many previously unbanked Latinos in North Carolina;
Serves its predominantly low-income membership by a staff that’s bilingual and bicultural;
Provides low-cost check cashing, money transfer services, low-interest credit builder loans, and other products to meet members’ needs;
Has a member advisory board in each branch;
Offers consumer loans to those lacking a credit history and attributes its award-winning financial education to its very low 2% delinquency rate;
Partners with businesses and organizations to aid outreach; and
Gives first-time home buyers access to mortgages. Of the 600 mortgages the credit union has provided since 2004, 70% were made to first-time home buyers.

Erika Bell, vice president of strategy and services for the $106 million asset credit union, cites several key practices in Latino Community’s success:

  • Creating a comprehensive package of products and services;
  • Hiring a fully bilingual staff that represents the community they serve; and
  • Offering loans that build credit and move people along the lending continuum without requiring a formal credit history.

“It’s a mistake to think that a credit score is going to provide you with an accurate assessment of someone’s creditworthiness, particularly in underserved markets,” Bell says. “We’ve been able to hone our underwriting criteria based on our members’ needs.”

Mortgage products are designed to help members purchase their first homes. Options include two-year, adjustable-rate first mortgages and fixed-rate mortgages with terms of 15, 20, 25, and 30 years.

Members can obtain 90% mortgage financing without a formal credit history if they provide three alternative credit references for a minimum of 12 months, with at least two from utility companies.

Partnerships with Latino, religious, immigrant, and social justice organizations help Latino Community reach current and prospective members.

State Employees Credit Union [], Raleigh, N.C., provides back-office services and serves as a mentor for compliance, information technology, and data services. This allows Latino Community to focus on developing policies and products that meet its members’ needs.

“We’re very proud of the way we buck the assumption that low income or underserved equals higher risk,” Bell says.