Loan Strategy Makeover

San Francisco Federal Credit Union increased loan volume 12% by identifying shortcomings within both the institution and market.

San Francisco is one of the country’s most progressive cities, and San Francisco Federal Credit Union ($827M, San Francisco, CA) is catching up to the city’s forward-thinking spirit.Five years ago, the co-op brought on new CEO Steven Stapp, whose hiring set off a series of changes that included a complete rebranding across all channels.

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Its shift in attitude has helped the 59-year-old credit union achieve renewed growth in several categories, particularly loans. Rebecca Lytle, SFFCU’s senior vice president oflending, revampedthe co-op’s approach to lending when she started with the credit union three years ago. In 2012, SFFCU booked $112.8 million in loans, a healthy 12% jump from the previous year, and loans accountedfor 61% of the credit union’s income. Much of that growth is attributed to real estate, $61.4 million, and business loans, $29.1 million. Historically, the co-op’s real estate loans consisted of 95% refinances; now, it is evenly splitbetween refinances and purchases.

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The rise in business comes from new loans, says Rebecca Lytle, SVP of lending. We don’t advertise, at least not right now. It’s all referral, returnbusiness, because we’ve focused on that member experience.

Such service seems to go a long way. As Lytle will be the first to admit, We’re not the lowest rate in the market. We don’t compete on price. We do it on service.

As it turns out, that service combined with a new loan application process, task prioritization, and openness to new business ventures has helped the credit union establish its place in the market.

Create An Automated, Interactive Application Process

When a member first applied for a loan, San Francisco Federal Credit Union historically had him or her complete what Lytle calls the 10-pound real estate package, or the usual40 pages of paperwork associated with taking out a loan.

We did not have any centralized lending and there was really no lending automation, Lytle says. If a member applied online, it was a snail mail application. You had to print it or fill it out. You could email it back. But it didn’tgive you a decision. It didn’t talk back to you. It wasn’t interactive.

So Lytle and her team replaced the old package with an online mortgage application in December 2011, followed by an online consumer application six months later. The online component not only serves as an application tool but also helps members exploreoptions for the type of loan they want. It even lets them search and play with rates and look at the costs of different scenarios.

In a tech-savvy area like San Francisco, members immediately embraced the responsive, interactive online application.

If you could see the graph when we launched our online application, in a very short period of time our volume doubled, Lytle says.

Prioritize Tasks, Outsource The Minutiae

Traditionally San Francisco Federal Credit Union’s bread and butter in the housing marketing was fixed-rate 30-year mortgages which just wasn’t going to cut it in the Bay Area’s cutthroat housing market.

We were plain vanilla, Lytle says. We needed a different set of products. To do that though, we needed to shore up our ability to service our loans.

To expand its range of products, Lytle needed her employees to focus on originating loans and giving their all to the member experience instead of filling out paperwork and getting stuck in back-end servicing processes. The solution? Lytle and her team outsourced some of the secondary servicing tasks.

Another time-consuming issue was the volume of refinancing paper.

Rates would go down, members would come back and want to refinance, Lytle says. You don’t want to lose the loan, so you refinance. We spent a lot of time refinancing our own paper.

To prevent refinancings from eating up employee time, Lytle introduced a one-page document that reduced the rate and payment without forcing the employee to go throughpiles of paperwork.

It freed up our people from doing our own internal refinances to bringing in new money, Lytle says.

Plus, the willingness of the credit union and the ease of the process engendered goodwill with members.

Jump At Unlikely Opportunities

In 2010 the city of San Francisco sent out a request for proposal to all financial institutions to help develop a financing program for taxi medallions. The interest was tepid. At the time, the economy was struggling and most financial institutions were not in the position to extend themselves to new business.

In such an urban, environmentally conscious city like San Francisco, with its surplus of transit options, from BART to MUNI to bicycle-friendly streets, Lytle and her team knew they couldn’t count on auto loans to pump up their loan volume. Taxis, however, were a different story. So the team worked with the city to create a funding program for taxi medallions.

We fund the purchase of taxi medallions, which is a very different market than any other taxi market, Lytle explains. You have to be a driver to own a medallion, so it’s providing a way for the individual driver to own his ownbusiness. We look at it as funding a small business owner.

These days, San Francisco Federal Credit Union provides funding for approximately 98% of the taxi market. In the two-and-a-half years of the medallion pilot program, the credit union has loaned $50 million. The credit union and the city are working totransition this into a permanent program, and the credit union has secured another $50 million exclusively for taxi medallions.

It’s important to look at opportunities, Lytle says. It might not be something you have on the shelf, but we’re all looking for a niche or something that differentiates us. Because we were willing to look at the opportunityand invest the time, it has reaped rewards for us well beyond any loans we could have done.

Next year, San Francisco Federal Credit Union will be celebrating its 60-year anniversary. Between streamlining processes for both members and employees and tapping into a new market, Lytleand her team have set up the credit union for its auspicious next phase.

June 6, 2014

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