By Ray Birch
OAK RIDGE, Tenn.—Y-12 FCU increased its loan volume by more than 25% over a two-year period thanks to streamlining its lending operations, introducing new products and not being afraid to prudently take on more risk.
One of the biggest changes was significantly reducing the number of staff selling the credit union’s home equity line of credit from 64 to just two.
That move alone has helped home equity lending to skyrocket at the $1.1-billion Y-12 FCU, which received a CUNA Mutual Group Excellence in Lending Award this past year for its efforts.
“We redesigned our home equity lending product,” explained Stephanie Zuleger, chief lending officer. “We came up with a whole new product.”
The big change was allowing borrowers to lock in and take a fixed-rate, fixed-term loan inside the line of credit. It’s a move that reflects a growing trend in the home equity space, and one which analysts have stated will be a key to home equity lending’s success in the coming years.
“We call the new product the ‘HELOCK’ with a ‘K,’ since members can lock in a fixed rate,” said Zuleger. “We just gave consumers more options than they had before and they responded.”
HELOC Activity Jumps
The credit union immediately went from opening approximately 10 HELOCs a month to more than 50.
“I think we hit a high of 65 one month last summer, and are now averaging about 55 per month,” she said.
What has also helped drive member response is a big change the credit union made to its home equity team. Previously, most of the front-line staff could open a line of credit for members. Y-12 reduced the number of staff originating HELOCs to two, and both employees are centralized in the credit union’s call center.
Stephanie Zuleger
The front-line team still promotes the line of credit, but they tell members to reach out to the call center for more details and to open the line.
“This just works a lot better,” said Zuleger. “Before, we had 64 people who were a jack of all trades and not masters of the home equity line. They did not like selling the line of credit because they did not sell many of them. They were uncomfortable selling it, they made a lot of errors and they did not provide a great member experience because they fumbled through the process. These staff were the first to say that they did not want to sell a HELOC anymore.”
With the new line of credit streamlined and simplified, it’s easier to open online, which Y-12 encourages members to do.
“We will open one over the phone if a member prefers,” she said. “But the entire process around our home equity line of credit has been greatly improved. Now it is a quick and easy, nice experience for our members to open one. The people who originate these loans are experts and they keep things moving for members.”
Tough Decisions
The adjustments with the home equity line reflect a broader strategy put in place by Y-12 that led to tough decisions being made to overhaul many of its lending policies, processes and products.
In addition to a new CEO, Y-12 FCU also brought in a new COO and a new director of lending and chief lending officer in Zuleger, starting more than four years ago.
Zuleger said the credit union now takes a multifaceted approach to growing consumer lending, including improving the borrower experience, saying yes to more loans and enhancing operational efficiency. After hiring a new director of lending, the credit union also reorganized and centralized its lending staff and rewrote its loan policy and manual with a major shift to manage risk, not avoid it. Direct and indirect lending were consolidated into a single new platform, and e-signatures were introduced to further streamline the process. In addition to the new HELOCK, Y-12 also introduced the ULTRA personal loan.
“We saw that our direct and indirect auto loan programs were operating on two different systems,” said Zuleger. “We wanted to be consistent in our processes so we immediately went to one new platform.”
The credit union moved to centralize loan processing and boosted efficiencies.
“We reduced our error rates by over 100 month. That was a big deal,” Zuleger said.
Y-12 also made changes in its underwriting standards.
“We decided that we are not going to avoid risk. We now want to take smart calculated risks that make sense for the credit union and our members,” she said. “It’s a mindset change. For example, in the past a loan situation might arise and we’d say, ‘We don’t do that, that’s against the regulation.’ Today, we will carefully ask what is the reason for not doing it now—we ask these types of questions. We just don’t say no because that is what we have always done. We no longer cap the home equity loan, for example, at 85%.”
That has led the credit union to say yes to a lot more loans that are helping members, Zuleger said. “And if we don’t make some of these loans, our competitors will.”
Loan Adjusted
That is one reason the credit union adjusted its ULTRA Personal Loan, extending the term to five or six years based on the borrower’s needs, up from 48 months. The credit union slightly increased the rate on the product for the longer terms.
“But members never blink at that price, the monthly payment is what they are looking at,” said Zuleger.
She said Y-12 makes about $2-$2.5 million in the signature loans monthly now.
“Again, if we don’t make these kinds of loans, make these kinds of adjustments, our members will go to someone else who will,” she said.