FOCUS Diverse loan products and flexible underwriting standards allow CUs to get to "yes." Technology upgrades help CUs iron out lending wrinkles. Board focus: Overall CU loan growth should increase modestly from 1% in 2011 to 3% in 2012.

Innovative lenders are able to spot new avenues for growth while others seem content to travel the same worn paths. And in an environment where consumers are reluctant to borrow, innovative lending strategies have become essential for growth.

Credit unions that won 2011 Excellence in Lending Awards exemplify innovation through their new products, revised underwriting policies, and streamlined operations.

The awards—sponsored by the CUNA Lending Council and CUNA Mutual Group—illuminate credit union lending excellence in four categories: serving members of modest means, and mortgage, consumer, and business lending.

Mortgage diversity

Indirect lending contributed to loan losses and rarely produced worthwhile member relationships for Charter Oak Federal Credit Union, Groton, Conn.

So the $687 million asset credit union exited indirect lending in late 2009 to focus on mortgage lending and attract new members with cross-sale potential.

Charter Oak Federal’s Accelerated Mortgage allows homeowners to refinance to an eight- or 12-year term at a low, fixed rate.

Roughly 90% of the more than 500 homeowners who refinanced through the program in 2010 were new members with an average loan-to-value of 45% and credit scores in the high 700s, says John Dolan, senior vice president/chief lending officer.

Accelerated Mortgages now account for one-third of the credit union’s mortgage portfolio.

“Having eight- and 12-year products instead of 30-year mortgages in our portfolio is a great deal,” Dolan says. “Plus, these members all have stellar credit scores. So it was a total home run.”

Other steps Charter Oak Federal took in 2010:

• Moved all mortgage processing and underwriting in-house;
• Implemented software from Mortgagebot to introduce online mortgage applications and streamline processing and servicing;
• Reorganized the lending department and transferred six employees from other departments to the loan department to handle higher volume;
• Expanded member business lending;
• Added software from CU Direct Corp.’s CUDL program to offer online auto loan applications and process applications; and
• Worked with the marketing department to use radio, newspaper, and transit system advertising to promote mortgages and other loans.

Dolan says this lending overhaul had a “ripple effect” that continually required additional changes. For example, the credit union redesigned its website to accommodate online applications and offer new products.

“It was a challenging time that required the staff to work really hard,” Dolan says.

The result was a strong team knit together by shared accomplishments, including total lending of $177 million in 2010—a 35% increase over the previous year’s $131 million.

Charter Oak Federal made 1,172 mortgages, maintained a 95% member satisfaction rating, and became the top aggregate mortgage lender in its region, beating out much larger competitors in ratings published by The Warren Group.

It expects to maintain that top ranking by completing more than 750 mortgages in 2011.

For its efforts, Charter Oak Federal received an Excellence in Lending Award in the mortgage lending category for credit unions with more than $250 million in assets.

Consistent contact

To reach potential borrowers, lenders must recognize a simple fact: It’s not your members’ responsibility to know what your credit union offers, says Greg Baker, vice president, sales and marketing, at $415 million asset
University of Kentucky Federal Credit Union in Lexington.

“It’s your responsibility to educate them, whether they need the product now or in the future,” Baker says.

Consistency is crucial if you want to reach members via their preferred channel to share information about products and services.

University of Kentucky Federal aimed to convince members that the credit union is a trusted partner they can rely on in tough times to provide great deals on loans, as well as consistent service and financial advice.

The result has been steady member growth, increasing 8.1% in 2009 to 38,717 members; 12.3% in 2010 to 43,486 members; and 9.8% as of November 2011 to 47,032 members.

A comprehensive campaign using mailings, billboards, Facebook and print advertising, and emails promoted loans and positioned the credit union as members’ trusted financial institution.

University of Kentucky Federal formed a committee of college students between the ages of 18 and 28 to connect with young members. The student committee helped the credit union launch a student loan program in 2010.

University of Kentucky Federal also reached out to indirect lending partners with efforts including a golf outing to inform participating dealers about rates and terms.

And creating an indirect mortgage group strengthened ties with local real estate brokers to offer home equity loans for real estate purchases.

A stronger indirect lending platform allowed the credit union to increase indirect loan originations from $29 million in 2009 to more than $51 million in 2010.

Automated decision engines for indirect and online applications streamlined loan reviews. Nearly half (46%) of the loans were approved through the automated channel in 2011.

University of Kentucky Federal received an Excellence in Lending Award in the consumer lending category for credit unions with more than $250 million in assets.

Next: Business targets