By Andrew Tilbury
Originally published on CU Insight
The recent surge in lending by credit unions — 8.8% from Q1 2013 to Q1 2014 — has been aided by an overall increase in consumer credit market share, competitive loan pricing, and elevated consumer confidence. While this is good news for credit unions, lower origination fees combined with fewer home loans continue to contribute to an extended decline in non-interest income. Additionally, rising employee compensation and branch operation costs are undercutting these new sales opportunities. (Credit Union Times & Callahan) Building efficiency into loan origination processes is critical to making sure that new loans are being added faster than new expenses are being incurred.
During a recent Bluepoint webcast, Increase Employee Efficiency Today: 5 Operational Improvements, an audience poll showed that 55% of the credit union respondents expected to find paper-related inefficiencies in lending. Further, based on direct observation of 75 credit unions during the past 18 months, there are still gaps in availability which means that employees must keep duplicate files of all current work in order to do their jobs and to efficiently respond to member requests. With hundreds of pages in each loan packet, the paper costs and the time spent printing and copying adds up quickly.
Let’s examine the typical steps a loan goes through from application to archival. It is hardly surprising that paper creeps (or crashes) into the loan process when we consider just how many people, systems and processes are involved in each step.
- Application and Origination. Online applications and electronic origination offer convenience and considerably streamline processing. Simply having these systems in place, however, will not remove paper from your operation; it is common to print out extra copies for members, to keep in a duplicate file, or to forward to colleagues if systems integration is incomplete.
- Underwriting. At this stage in the loan process, you’re likely to need copies of photographs, a W2, credit reports, bank statements, and more. Few electronic systems accommodate all of these different types of content in an easily relatable way, so most loan officers will simply print the entire packet in order to store all of the content together.
- Approvals and Funding. This process usually involves multiple people who need constant access to the same documentation. Without an electronic system to facilitate this process, each person will need full paper copies of everything. If consultation is needed from other departments, additional copies of all documentation will be created to keep the process moving.
- 4. Audit. Credit unions often store different pieces of information in different places, which must be painstakingly reassembled for comprehensive review. It can take multiple employees and several days to collect any paper documentation—from desk drawers or crates of paper waiting to be archived. Additionally, electronic records from disparate systems are often printed to be combined into a single packet.
- 5. Archive. Any amount of lag-time between document receipt and archival creates risk for your credit union and members that cannot be ignored. Whether due to physical transport or filing backlogs, employees will often create their own ‘ghost files’—unauthorized, untraceable, and unsecured—in order to assure immediate access.
While credit unions continue to seek loan growth in order to grow membership and income, they will continue to experience increasing costs if they fail to strengthen processes and eliminate waste.