Cooperative Principles In Refinance

Saving members money through refinance challenges has become a trackable industry trend that grows loan portfolios.


In this economy, credit unions and their members seem to have some differing goals. Members want to save money, but credit unions want to lend more.

Many credit unions are envisioning ways to help both the institution and its members by saving members money through refinance challenges.

Ventura County Credit Union ($605.4M, Ventura, CA) has saved members $2.5 million in three months and is making substantial progress toward its $5 million goal by December. At the same time, the credit union has refinanced 711 loans, which Tina Estes, director of marketing at Ventura County, says is strong growth for the cooperative.

“Our members are looking for smarter ways to borrow,” says Estes. “They may not be taking out more new loans, but trying to find ways to rework the loans they already have.”

Seven Seventeen Credit Union’s ($816.3M, Warren, OH) goal was to save members $5 million as part of its Simplify and Save program. The credit union raised the goal from $1 million last year after hitting that goal in seven weeks. In five months, Seven Seventeen hit the $5 million mark, and has continued the program, saving members another $5 million in the next five months.

Simplify and Save not only targets refinancing as a way to save members money, but also focuses on financial education.

“We’re building the ‘teach a man how to fish’ philosophy into the program,” says Eric Lanham, senior vice president of marketing at Seven Seventeen. “Feedback has been exceedingly positive.”

More than 1,200 members have experienced loan interest savings. Throughout the first five months of 2012, Seven Seventeen’s loans grew by $9.3 million compared to the same time last year. Its loan originations rose by 26.32% from March 2011 to March 2012, compared with the national average of 25%.

Both Ventura County and Seven Seventeen refinanced loans before its challenge, but Estes says the $5 Million Challenge helps member service representatives focus on refinance and broach the subject with consumers. Lanham says Ventura has had the same positive results.

“The biggest incentive is just having a program where [employees] can very easily start a conversation with the members,” Lanham says.

Getting staff onboard with the initiative is crucial. While Educators Credit Union ($1.4B, Racine, WI) rewards its employees individually, Ventura County gives group incentives. Ventura County gave the entire office doughnuts and bagels after reaching $1 million saved. When it reached $2 million, the every employee got a coffee or latte. Ventura gives the employees customized badges and ribbons depending on the amount of money they save members. Members are intrigued by the badges and ribbons and ask about the savings challenge, says Estes.

Seven Seventeen, Ventura County, and Educators are finding value in tracking the number of refinanced loans and the amount of money members saved. Ventura County will continue tracking the refi loans even after the challenge ends.

“It’s a new way of doing business,” says Jackie Benoun, vice president of lending at Ventura County. “We need to be tracking the loans we steal from other financial institutions.”

Tracking is a big part of Educators’ refinance challenges. Through its Fast Lane Financing program, Educators is working toward a $30 million goal in 2012. The cooperative financial institution, which has been participating in member savings challenges for four years, has already saved its members close to $28 million with more than half a year left in the challenge.

“Credit unions are always working to improve the financial situation of  members, therefore a program designed to help members save on their current debt just makes sense,” says Linda Hoover, senior vice president of lending at Educators. “The trend is just illustrating what credit unions are all about, people helping people.”

And a credit union in Michigan, Michigan State University Federal Credit Union ($2.2B, East Lansing, MI), is also saving members money through refinancing, and it’s doing it quickly. The cooperative financial institution set a $1 million goal last year that staff hit within three months.

This year, the credit union hit the $1 million mark within two months and decided to make it a year-round promotion. During the second quarter of 2012, MSU did $3.4 million in loans that saved members $369,277. The credit union has saved its members $1.7 million so far this year.

MSU started the program after looking at its loan opportunities and noticing many members didn’t have specific loans with the institution.

“We focused on refinancing loans from other institutions at a cost savings because we believed 90% of the time our rate would be better,” says April Clobes, executive vice president and COO of MSU. “Others are also doing this program to increase loans, better serve members, and help members save money with a better product and competitive rate.”

Benoun said she believes helping members save members money is just the right thing to do. When the economy tanked, many individuals had trouble managing their finances. A member may have had poor credit a few years ago resulting in a higher interest rate loan, but Benoun says they should be able to get an improved interest rate now.

 “As a cooperative we’re here to help members in a tough time,” Benoun says.




June 25, 2012


  • a wonderful way for "cooperators to cooperate among themseleves" in a true cooperative spirit. away from dog eats dog. kudos to credit unions.

    oluka peter
    oluka peter
  • Mortgage loans are typically sold on the secondary market. Auto, personal and "other" loan types are typically kept in-house. The article is not addressing mortgage loans nor, is it referencing just consumer loans. So we won’t go into HARP loans. We’ll focus only on refinancing and saving the borrowers money.

    Borrower’s LTV's and debt ratios are looked at in various ways. The numbers vary dramatically from auto to auto and borrower to borrower. Higher LTV's can sometimes pose an issue especially if working on a lower scored borrower based on a credit unions underwriting guidelines. Any underwriter or Lending Manager can determine if an exception can or should be made. But, exceptions are never the rule.

    The savings or benefit is accomplished by making sure the rate and payment is lower than the borrowers current lender. Otherwise, there is no benefit to the borrower. As a side note, a majority of borrowers see the tru savings if they have refinanced their loans with the remaining term they currently have. Interest rates are being lowered, as are payments - and the attempt is to not have borrowers stretch out their loan term. Who wants the have a loan payment stretched out another 3-12 months justs to make sure their loan payment is lower?

    As an example, going from a payment of $411 to $399 a month and saving the borrower $12.00 a month seems small; but, with a remaining term of 42 months - that's a savings is $144.00 a year and for 42 months, a total of $504.00 in interest that was not paid to that lender for the remaining months in the term! That is how the savings works.

    What mid to large sized credit unions are doing is offering better pricing, service and products that fit the borrowers and credit union’s needs - that beat out the competitors. I’m sure smaller credit unions can figure that out and play with the bigger credit unions.

    Credit unions win by gaining membership, savings and loan business and most of all member relationships. The members win by having a great financial institution, great service and products, and real people who don't think of them as a number but, who actually care about their financial wellbeing.

    Did I mention how awesome credit unions are at helping borrowers save money?
    Credit Union Member and Employee
  • I love the tenor of the article - saving members’ money by providing lower interest cost on home financing is what credit union are all about. In fact vehicle loan, credit card balance and real estate loan refinancing has been a cornerstone of our credit unions lending initiatives for years.

    What I am sorry the article did not cover is how are these credit unions providing the refinance dollars to accomplish their goals? Are they selling these loans on the secondary market or are these predominantly portfolio refinances? How are they addressing members with high LTV's due to declining values? Are they pursuing HARP loans? Are they doing loan modification within their own portfolios? Are they doing the 8-12 year low cost refinances which seem so popular these days?

    It is a challenge for small & mid-sized credit unions to be players at this game unless they have a combination of secondary market access, excess liquidity, and a very strong ALM knowledge to monitor the effect of putting long term historically low fixed rates in their portfolio.

    It is nice that the $500 million to the multi-billion dollar credit unions have the expertise and capacity to do what all credit unions would love to do for their members but in reality the vast majority of credit unions don’t have that luxury. By providing some details about HOW they are doing what they are doing, smaller credit unions can hopefully gleam some useful tactics that may be implementable in their credit union. That information would make this article a real winner!

    Victor Petroni
  • This article is excellent, but it is also very important that this credit union, specially at peraland location, work more in customer service.We are expecting been received with a smile. Also they need to have knowledge of alternative to help us better how to increase our money and not wait for us to ask. It is important make us feel that our deposit, car loans and personal loans we make thru the credit union are worthed, and not the way around. Customer service is the key to keep us happy. Unfornately I have seen managers and employees that do not have that. As a teacher I am always observing body language and I can tell when people are not happy on what they do, or simply do not like people. Unfortunately,no everybody have the still to work with people. Training will help a lot on that. Ther manager is the one create an environment of happiness, and good communication skill with customer. Is like the teachers in a classroom, we are reponsible for the children to want to come to school every day. Thank you, I hope my message be helpful.