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L-R: Rick Schmidt, CEO of WestStar CU; Richard Holloway, CEO of Alta Vista CU; and Ray Shams, Chief Lending Officer for Xceed Financial FCU

LENDING'S NEW AGE: BEYOND THE SCORE
updated 01/28/14 09:05 AM
A 'Huge Potential' for CUs
“It’s a vastly different world out there,” said Rick Schmidt, CEO of WestStar CU. “We have to look beyond our members’ past and focus on where they’re going in the future.”

Hailing from Las Vegas, where the bulk of his members are gaming employees, Schmidt’s perspective illustrates a phenomenon gaining speed across Nevada, California, and the nation. Tarnished by the Great Recession, many borrowers are still too risky to lend money to, or too young to show established credit.

That’s on paper. The reality is, several of these individuals are just as creditworthy as their peers with higher or established credit scores, for various reasons. Credit unions have an opportunity to fill this gap, a fact that many CEOs and lending executives are starting to realize.

“About 70 percent of people who apply for loans at our credit union have a credit score under 650,” Schmidt said. “Does this mean they’re not worthy of borrowing from us, or they’re bad people? We can’t completely use the past to judge their future because the past is so, so skewed.”

Research points to the same conclusion. A migration toward “holistic underwriting” by some credit unions and banks is stirring in the ranks, according to a white paper released in August by the Credit Union National Association’s (CUNA) Lending Council. Folks who had good credit are now seemingly subpar due to financial setbacks during or after the recession—usually the loss of a job, home foreclosure, or sometimes both. They are “still willing to pay their debts,” the council’s research states. “There is room for loosening some underwriting standards while still being prudent lenders.”

A commentary published by the Federal Reserve Bank of Cleveland in November 2010 reminds lenders that consumers’ credit scores aren’t “totally within the individual’s control.” The odds of someone repaying a loan aren’t completely dependent on his or her score, but rather “their translation into the level of riskiness they represent at the current time.”

Further research issued by the Applied Research Institute—a consortium of credit unions in California, Nevada, and other western states—validated this point in a September 2010 analysis, entitled New Consumer. “Standards need to be adjusted,” it states. “If not, credit unions are likely to unnecessarily over-tighten and damage the service they provide their members, and lose out on potential loan opportunities.”

This forward-looking approach of seeing consumers in a new light goes even deeper. Technological improvements to underwriting and so-called “behavior profiling” and “big data mining” are vetting the right opportunities for lending at some financial institutions, said Karan Bhalla, managing director of IQR Consulting, a firm serving both credit unions and banks.

“Behaviors tell a lot,” Bhalla said. “They tend to be very strong indicators of loan performance.”

Studying payment behaviors and decision habits isn’t new. But in this day and age, larger amounts of information and analysis on credit union members and bank customers is helping anticipate the exact moment they’ll need a loan or credit, along with their chances of default. Banks, especially the large ones, are ahead of the curve on this trend.

However, even the smallest of credit unions have enough data to start crunching numbers and charting possibilities.

“In many cases, you can still lend to someone even if they don’t have a good FICO score,” Bhalla said. “There is huge potential for credit unions of all sizes, a few of which are at the beginning stages of this. For many, it will be a leap of faith.”

Click here to read the full perspectives of WestStar CU CEO Rick Schmidt, Alta Vista CU CEO Richard Holloway, and Xceed Financial FCU Chief Lending Officer Ray Shams within the latest News and Views column on Pages 6-7 in the February/March edition of Credit Union Digest!

 
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ADDITIONS TO SEPT. 'HIKE THE HILL' updated 08/24/15 12:08 PM
Coffee With Regulators and MBL
In two weeks, the California and Nevada Credit Union Leagues’ will host a “Coffee with the Regulators” meeting during the annual Hike The Hill gathering on Capitol Hill (Sept. 8-10). Credit union attendees will discuss relevant and important issues with officials from the National Credit Union Administration (NCUA) and Consumer Financial Protection Bureau (CFPB).

FHA ISSUES STATEMENT ON 'PACE' LOANS updated 08/24/15 02:41 PM
Consistent With Leagues' Comments
On Monday, the Federal Housing Administration (FHA) issued a policy statement on Property Assessed Clean Energy (PACE) that is consistent with comments from the California and Nevada Credit Union Leagues’ position on the issue.

REP. MCCLINTOCK SUPPORTS MBL RULE updated 08/21/15 10:45 AM
Submits Letter to NCUA
As reported in the California and Nevada Credit Union Leagues’ Advocacy Blog, Representative Tom McClintock (R-El Dorado) is now the second member of Congress to send a support letter to the National Credit Union Administration (NCUA) in support of credit unions and their proposal to modernize the member-business lending (MBL) rule. Rep. Julia Brownley (D-Ventura) sent a letter last week.

WHAT'S DRIVING MEMBERSHIP GROWTH updated 08/19/15 11:59 AM
Three California Perspectives
Competitive products and services don’t tell the whole story of why membership continues to soar at several credit unions in California. Neither does the growing economy.

RMJ TOURNEY RAISES NEARLY $60,000 updated 08/19/15 10:39 AM
Event Sold-Out With 144 Golfers
The Richard Myles Johnson (RMJ) Foundation/CUNA Mutual Golf Tournament, held August 17 at the Newport Beach Country Club in Newport Beach, CA, raised nearly $60,000 for the state foundation for credit unions in California and Nevada.

'PACE' EXPANSION ATTEMPT DEFEATED updated 08/18/15 10:36 AM
League Engaged Lawmakers on Issue
The California Credit Union League has helped defeat an attempt in the California legislature (Senate Bill 602) to give super-lien rights to unregulated lenders through Property Tax Assessed financing.

CALL TO ACTION: MBL COMMENTS NEEDED updated 08/17/15 04:28 PM
NCUA Deadline is Aug. 31
More positive comment letters that support the National Credit Union Administration’s (NCUA) proposed member business lending rule are needed to help the agency shape its final rule—including letters from your credit union and your business members.

CA CUs AID FIRE VICTIMS updated 08/14/15 03:20 PM
Fundraising Efforts Continue
As more than dozen fires raged on in northern California in recent weeks, area credit unions stepped up efforts to help—supplying the hard-working firefighters with goodie baskets of water, food, and supplies; helping in large animal rescues and defending family farms; and raising much-needed donations to help those who have suffered losses. Some Coast Central CU staffers—who are also volunteer firefighters—were deployed to help fight the fires.

CU Direct Partners with CULA updated 08/13/15 02:54 PM
Leasing Option Availability
CU Direct, the provider of lending, automotive and strategic solutions to the credit union industry, has entered into a new agreement with Credit Union Leasing of America.

MEMBER BEHAVIOR: SHIFT IS COMING updated 08/11/15 10:40 AM
Conference Spotlights Rates, Economy
It was evident during a three-day conference in San Diego that credit unions are on high alert as they wade into tricky waters and strategize how to manage balance sheet spreads and liquidity in light of the Federal Reserve’s upcoming federal funds interest rate hike.

CUs GAIN INSIGHTS AT SHAPIRO SUMMIT updated 08/11/15 09:25 AM
Talk Strategy, Marketing, Trends
More than 60 credit union leaders from California and Nevada, speakers, and League staff convened at the annual Shapiro Summit on Aug. 7-8 in Ontario, CA to discuss important issues credit unions $50 million and under face in today’s economy, and how to overcome those obstacles.

NCUA AWARDS $2 MILLION IN GRANTS updated 08/07/15 11:05 AM
Funds Help 225 Low-Income CUs
The National Credit Union Administration (NCUA) has awarded more than $2 million in grants to help 225 low-income credit unions expand products and services, open branches or relocate offices, advance digital growth, and provide greater security for their members.

Auto & Home Loans Drive Trend updated 08/07/15 02:42 PM
Member Lending Benefiting CUs
California and Nevada credit unions are experiencing auto and mortgage loan growth as part of a trend of increased lending activities by credit unions nationwide.

REP. BROWNLEY SUPPORTS MBL RULE updated 08/06/15 04:28 PM
Writes Letter to NCUA
As reported in the California and Nevada Credit Union Leagues’ Advocacy Blog, Representative Julia Brownley (D-Ventura) was the first member of Congress to formally write to the National Credit Union Administration (NCUA) in support of their proposal to modernize the member-business lending (MBL) rule. There will likely be many more to write in support of updating this outdated member business lending rule.

Vendor Authority Bill, Halted updated 08/05/15 04:20 PM
The League & CUNA Oppose Amendment
The U.S. Senate just adjourned for the August recess, but not without controversy for credit unions. The Senate was supposed to consider a bill addressing cybersecurity issues. During consideration, Sen. Elizabeth Warren (D-MA) introduced an amendment that would expand the NCUA's third-party vendor authority. The League and CUNA mobilized to halt any progress of this amendment. With the Senate's adjournment this afternoon, neither the bill or vendor authority amendment progressed. Credit unions, our CUSO partners, and vendors will now have time to further mobilize against future efforts.

CO-OP LAUNCHES CO-OP API SUITE updated 08/05/15 01:52 PM
New Developer Tool Helps CU Apps
CO-OP Financial Services is introducing a suite of APIs (application program interfaces) that will enable credit unions to quickly integrate the latest mobile and online technology directly into their existing mobile and virtual channels.

STATE EXPLORES BANKING MARIJUANA BIZ updated 08/03/15 02:30 PM
CU Reps Discuss on CA Panel
While California Board of Equalization Member Fiona Ma is proposing a state-run bank to serve the “legitimate” marijuana industry in California, the board is concerned with people walking into their offices with thousands of dollars in cash to pay their state taxes.

CUNA’S ’15-’17 STRATEGIC PLAN updated 07/31/15 09:44 AM
Letter From CEO Jim Nussle
The Credit Union National Association (CUNA) sent to credit unions a letter which contained the association’s 2015-2017 strategic plan, detailing how President and CEO Jim Nussle will fulfill mandates he received from the board when he signed his contract last September.

CATALYST'S ANNUAL ECONOMIC FORUM updated 07/31/15 08:54 AM
Registration Now Open
Registration is now open for Catalyst Corporate's 38th annual Economic Forum, which will be held Oct. 5-7 at the Omni Mandalay Hotel, near Dallas, TX.

WCMS CELEBRATES ‘15 GRADUATING CLASS updated 07/28/15 08:42 AM
New Fellowship Announced
On July 23, Western CUNA Management School (WCMS) celebrated its 2015 graduating class—the NU Class—in an elaborate affair. Ninety-seven students graduated with Northwest Credit Union Association President and CEO Troy Stang serving as the commencement speaker.

NEW VERSION OF SPRIG BY CO-OP updated 07/24/15 12:29 PM
Available at iTunes and Google Play
An updated version of Sprig by CO-OP is now available at iTunes and Google Play—adding native apps, expanding transaction filtering, and enforcing enhanced security.

NCUA TESTIFIES BEFORE CONGRESS updated 07/24/15 09:24 AM
Chair Debbie Matz Speaks
As reported in the California and Nevada Credit Union Leagues' Advocacy Blog, yesterday the House Committee Financial Service, Subcommittee on Financial Institutions, and Consumer Credit had a very lively hearing where Debbie Matz, Chair of the National Credit Union Administration (NCUA), testified

NCUA APPROVES $1.3M REDUCED BUDGET updated 07/23/15 09:22 AM
Board Cuts Operating Fund
The National Credit Union Administration (NCUA) board approved a $1.3 million reduction to the 2015 operating budget, making better use of California and Nevada credit union dollars. Credit unions are obligated by law to pay into the NCUA, but that does not preclude the NCUA from its responsibility to operate in an efficient manner.

NCUA HEARING SLATED FOR JULY 23 updated 07/22/15 12:35 PM
Chairman Debbie Matz to Testify
The National Credit Union Administration (NCUA) Chairman Debbie Matz is scheduled to testify before the House Financial Services Committee’s Subcommittee on Financial Institutions and Consumer Credit on Thursday, July 23 at 11 a.m. PT/2 p.m. ET. Please note this hearing was originally scheduled for Friday, July 24.