East Idaho Credit Union had been operating a successful indirect lending operation, but executives believed there was still untapped growth potential they needed to explore. The underlying reason for this belief involved indications that some of the credit policy rules could be preventing growth.
Established in 1935, East Idaho Credit Union has $256 million in assets and a loan portfolio of $144 million. The credit union is headquartered in Idaho Falls, Idaho, with 10 branches in eastern Idaho to serve its 34,000 members.
Besides gaining this deeper understanding, East Idaho also wanted to increase its auto-decisioning rates as well as see a 50% jump in approval rates for applications with grades of B and lower. East Idaho’s executives soon realized that the answers wouldn’t be found without consulting expertise.
East Idaho representatives met with the CRIF Achieve analytics team. Achieve uses global risk management experience combined with credit scoring, decision management analytics, and data aggregation to create solutions that transform analytics from costly ad-hoc projects to affordable business processes.
East Idaho Credit Union considered Achieve to assist us with optimizing our ACTion loan origination system to meet our goals, says Cindy High, East Idaho’s chief lending officer. Initially, our team thought that we could use a trial-and-error method combined with our own internal report analysis to achieve our lending goals.
Meeting with the Achieve team allowed East Idaho to see the deep-dive detail used to provide performance feedback. High says they they saw the value in partnering to accomplish their goals more quickly. If East Idaho were to take this task on in-house, it might have spent an entire year creating reports, learning the system and making and measuring incremental changes. By partnering with Achieve, High says, they felt they could make more educated decisions and realize their goals in a much shorter timeframe.
In the end, we chose to spend some money up front to give us a better opportunity to increase our income right away, she says.
The Achieve team assessed East Idaho’s operations and recommended an underwriting analytics consulting package. This proposal included three services: a scorecard validation to provide insight on how the current scores were performing; an evaluation of expert rules that could uncover opportunities to change the lender’s policy without incurring additional risk; and an override analysis to demonstrate adherence to the existing policy.
Using analytics, the Achieve team found that the application pool was quite steady and that East Idaho’s decisioning was overly conservative. The Achieve team’s findings also showed East Idaho which particular rules could be addressed to meet its needs.
The credit union now reviews E-paper instead of declining it, and more D-paper is being reviewed instead of declined. For C-paper, some will now cascade to a secondary matrix to allow additional analysis and potential systematic approval when PTI and the finance amount are lower.
At least 10 policy changes were made for each product. For example, matrices were changed so they would allow greater access to detail as well as approve more accounts in the lower tiers. LTV cutoffs were increased. Debt-to-income ratios were altered from 10% bands to 5%. Finally, overlapping rules were omitted on delinquency and bankruptcy.
The results have exceeded our expectations, High said. Our indirect lending saw almost a 60% jump due to the changes implemented.
Indirect lending funding amounts increased from $14 million in 2013 to $22 million in 2014. Delinquency rates also saw a dramatic improvement, decreasing 64% from 0.67 in 2013 to 0.24 in 2014.
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