Over the years, ASI Federal Credit Union had gone through multiple iterations of indirect lending to capitalize on opportunities in the local market and compete with other lenders. All of its indirect lending during that time had been handled in-house. The credit union, however, experienced an unacceptable level of charge-offs, so it decided to transition to purchasing indirect paper from an aggregator. ASI handled the servicing of the loans, and the aggregator took care of everything else. This meant that ASI had no control over the underwriting, pricing or other important aspects of a successful indirect lending program.
“The majority of that paper was coming from outside of our member service area, so the credit union decided to make a strategic change to move in a different direction,” said Will Scott, the credit union’s vice president of lending. “We decided to bring in-house indirect lending back to our local member-service area. The biggest challenge was that, as a medium-sized credit union, we would need to find an outside partner since we didn’t want to invest in additional overhead.”
Founded in 1961, ASI serves more than 57,000 members in the greater New Orleans area. It has 12 branches and more than $324 million in assets.
With only one person handling in-house responsibilities, Scott explained, the credit union knew it was important to find the right provider that could lend its expertise, especially with dealers, to design a program that would allow it to capitalize on a local market where ASI saw tremendous growth potential. But besides dealer management, Scott said ASI’s indirect program needed a complete overhaul from top to bottom.
As an additional business challenge, ASI’s indirect lending portfolio was trending downwards since it decided to scale back on loans from its existing program. It was only averaging around $500,000 each month in new originations. Total balances had dropped from $50 million for roughly 2,600 loans in January 2015 to $38 million for 2,100 loans in January 2016.
ASI chose to partner with CRIF Select and its SelectComplete solution to address its concerns. It currently utilizes Select’s indirect loan origination technology as well as its services for dealer management, processing and funding, and consulting and reporting.
“We started with a list of four providers and narrowed it down to two providers,” Scott said. “What really separated CRIF Select from the other finalist was their expertise in dealer relationships and trusted reputation for customer service.”
SelectComplete is a fully loaded offering that provides a turnkey indirect lending solution to guide its partners from start to finish. These customized solutions include technology, dealer management, underwriting, processing, funding, reporting, and consulting. SelectComplete is ideal for any institution that wants to keep personnel costs at a minimum or wants to reel in the profits of an indirect leading program without the responsibility of having to operate all of it.
Since partnering with Select in July 2016, ASI is now averaging $5 million per month in originations. It well surpassed its projection of $8 million in originations in 2016 by finishing the year with just more than $10 million.
To get the program started again, Select provided a market analysis by speaking with dealerships and pre-selling the program, as Scott described it. This allowed the credit union to set some initial monthly forecasts that ended up being accurate. Those benchmarks, which were routinely surpassed, proved to be very helpful when presenting the program’s business case of the market’s potential to the credit union’s board of directors.
“We don’t see any signs of our success slowing down,” Scott said. “In fact, we’re trying to make connections with the secondary market so we can manage concentration limits and liquidity needs.”
By offering connectivity to portals such as Dealertrack and RouteOne, Select’s technology immediately gave the credit union creditability and access to the local dealer network. Scott added that the dealer representative from Select has made a positive difference by staying in front of dealers on a regular basis to get dealer agreements signed. The dealer representative has been ASI’s eyes and ears, Scott explained, to figure out why some dealers drop off as well as for information the credit union can use from a competitive standpoint.
For example, ASI wanted to get deeper paper to help its overall yield. The Select dealer representative was able to provide market data that showed the credit union was not as competitive in a particular credit tier. As a result, pricing adjustments were made and production improved. The representative also helped ASI understand where its competitors stood from a standpoint of flat fees, so adjustments were able to be made, which quickly boosted volumes.
“The people we work with at Select have been great, and it really is a partnership,” Scott said. “We’ve received excellent volume as well as strong quality. We are very happy.”
CRIF Select offers the tools and expertise to help any credit union build and maintain a superior indirect lending program. For a complete guide on how to build or strengthen each portion of your program including dealer management, technology, underwriting, processing and funding, and consulting and reporting, please click the button below to request a copy of our Universal Roadmap for Indirect Lending Success.