When CEO Joseph Schroeder started at Ventura County Credit Union in October 2009, total loan growth was decreasing at a negative clip of -6.02%; its loan-to-share ratio of 62.44% lagged behind its asset-based peers’ 78.45%; and its loan originations and efficiency ratio were underwhelming for an institution of its size.
Changes, specifically to the mortgage side of the credit union’s operations, were nigh.
“[Joe] told us to retool the department because we were not funding many loans for the size of the department,” says Jackie Benoun, vice president of lending at the credit union. “It was just not the bread and butter of the credit union, and Joe had the vision to think we could become more competitive.”
CU QUICK FACTS
ventura county Credit Union
data as of 12.31.14
HQ: Ventura, CA
12-MO SHARE GROWTH: 4.16%
12-MO LOAN GROWTH: 50.26%
To that end, Ventura County Credit Union ($693.5M, Ventura, CA) underwent a three-step transformation. It expanded its suite of mortgage loans, introduced and upgraded technology, and created a team of mortgage loan originators.
To date, results have been tremendous.
As of fourth quarter 2014, VCCU’s 12-month loan growth of 50.26% has helped to push its loan-to-share ratio to 72.45%, according to data from Callahan & Associates. This performance was driven by first mortgages, which increased 61% year-over-year, and auto loans, which increased an equally impressive 70% during the same time period.
“We started from the ground and designed the mortgage operations department to handle volume,” says Greg Uttal, assistant vice president and director of lending.
A Diverse Suite Of Loans
When Schroeder became chief executive nearly six years ago, VCCU offered only a few mortgage products: a 30-year fixed, a 15-year fixed, second mortgages, and HELOCs.
“It was a limited product offering,” Benoun admits.
In fourth quarter 2010, the credit union repositioned its existing offerings to meet Fannie Mae and Freddie Mac standards so it could sell those loans on the secondary market, which gave VCCU more flexibility to diversify the loans it held in portfolio.
Today, the credit union offers a range of products, including FHA loans, VA loans, conforming and non-conforming loans, and high-balance loans.
ventura county's Loan Portfolio
Data As of December 31, 2014
Source: Callahan & Associates’ Peer-to-Peer Analytics
In the fourth quarter of 2013, the credit union introduced a 5/5 ARM inspired by the one offered at Pentagon Federal Credit Union. Ventura bases the loan rate on the five-year Treasury note and adjusts rates every five years, and it amortizes payments on a 30-year schedule.
In California, Uttal says, housing costs and relocation rates are among the nation's highest, both of which factored into VCCU’s decision to offer the product. Although it also considered a 5/1 ARM, it chose the 5/5 for its rate stability and reasonable adjustment timeframe — important factors for a loan the credit union holds on its balance sheet.
Since introducing the 5/5, the product has made up approximately 47% of VCCU's first trustee loan business.
In addition to the 5/5 product, VCCU also offers a short-term mortgage that allows borrowers to “retire their mortgage when they retire,” Benoun says. These are niche loans for niche needs.
In concert with the new product offerings, the credit union stepped up its mortgage marketing efforts. It has taken out ads in the local community newspaper and presents information more prominently in its branches. Also in the branches, educated staffers confidently talk up and cross-sell the new mortgages.
Looking outside the financials, Ventura County surveys members once their loan closes to rate their experience. According to Uttal, responses are positive. over the life of the survey, 92% of members have rated their experience either “above average” or “excellent,” with 62% rating it as “excellent.”
As volume increases, so, too, does the strain on resources. To meet continued and expected demand for its products, VCCU updated its technological infrastructure.
“We took a gigantic leap forward in improving technology,” Uttal says.
The credit union introduced its automated mortgage loan origination system in fourth quarter 2010. Before then, VCCU completed all tasks manually, including completing mortgage applications by hand. It ran credit reports, prepared documents, ordered titles, and ascertained escrow fee information all by either phone or fax.
“it was pretty old school,” Benoun says.
By contrast, the new origination system processes this information automatically and has helped to close more loans. According to Uttal, in the year before the system was put into place, VCCU closed between $11-$13 million in loans. In the first year with the new system that total jumped to more than $33 million.
In 2013, VCCU launched a complete online application system. In the past, members had to apply for loans through face-to-face interactions with loan officers; now, the system gives members the option to apply online through VCCU’s own consumer portal.
The credit union’s system also gives members the ability to consult an online pricing engine, which allows them to see the interest rate market and determine which rate works best for them before applying.
“They can register to fill out an application and then sit and wait until rates hit where they want before they jump in,” Uttal says.
Boots On The Ground
Before Schroeder became executive, VCCU did not have mortgage loan originators.
“We waited for the members to walk in the door and say they wanted to apply for a mortgage loan,” Benoun says.
We started from the ground and designed the mortgage operations department to handle volume.
That’s not the case anymore. Today, VCCU employs six mortgage originators it hired from outside the institution. All had their real estate licenses and mortgage origination experience. In addition to increasing loan volume, the team’s initial goals included developing — or in some cases creating — community relationships focused on mortgages in line with its non-mortgage community relationships.
The mortgage origination team hits the streets to find partnerships that will bring in new members. Its work has resulted in a membership with the local board of realtors, several affiliate memberships, and increased participation at community events. These initiatives extended the credit union’s footprint in the community and have helped the credit union increase its membership base approximately 35% since Schroeder became chief executive.
For members, taking out a mortgage loan can be a painful experience. VCCU invested heavily in its products, technologies, and personnel to improve that experience. And it believes its efforts are working.
“The mortgage department asks members to provide tax returns and documentation that usually takes from 25 to 30 days,” says Benoun. “What I think is amazing is that the department still gets that 92% survey rating. I think that speaks to the delivery systems and the processes we have in place.”