Feed the need for speed

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					Feed the need for speed
Portland Teachers CU can close on innovative home equity loans in five days

             By Ron Hellenbrand                             • The EquityFlex Line of Credit is an adjustable-rate
            Feeding the need for speed in home                line of credit, but members can set aside up to
            equity lending gets Portland Teachers             three chunks of it as fixed-rate loans. Split-off a
           CU noticed in its marketplace. Its                 car purchase, for example, or a loan to a family
      remarkably flexible home equity products seal           member, so it’s easy to track repayment. As the
the deals.                                                    fixed loans are repaid, the available balance in the
                                                              line of credit increases. “It’s like having four loans
The $1.9 billion credit union offers a HELOC that             in one,” Schrader says. A marketing campaign in
members can split into three fixed-rate loans plus a          2003 touting an introductory rate of 3.99% on
line of credit, among other innovative home equity            100% LTV mortgages earned a whopping 795% ROI.
products. Portland Teachers uses its home equity line
to succeed where many lenders have not: It draws            • Convertible home equity loans allow members to
indirect auto loan borrowers into stronger relationships.     refinance auto loans using a 15-year home equity
                                                              fixed product. Although the rate may be higher
Portland Teachers’ home equity loans have outpaced            than the auto loan, members can borrow up to
the average growth among the largest CUs (those               $100,000, based on the equity in their home, and
with more than $1 billion in assets) in each of the           get the title to the car. From September through
past five years. Case in point: 36.92% annual growth          December 2004, the CU converted $7.3 million in
for Portland Teachers through September 2004,                 auto loan balances into $22 million in home equity
compared to 32.76% for peers. Its home equity                 dollars.
volume stood at $548.5 million through September
2004, compared to $198.7 million for peers.                 • Homeowners with a 30-year adjustable rate
                                                              mortgage and enough equity in their homes can
Speed as important as rate                                    refinance to a 15-year fixed-rate home equity
“In a competitive market like ours, the time it takes         product. Because it’s not a full-blown refinance,
for a member to obtain a loan is as important as the          members pay less in fees. And, by cutting the
rate,” says Kelly Schrader, VP of lending. The credit         term length, they also pay less in interest.
union serves employees of hundreds of nonprofit
educational organizations in the five-county area           Drawing indirect auto borrowers into the fold
around Portland, Oregon.                                    The CU’s relationship with CUDL, an indirect auto
                                                            lending CUSO, helps members receive financing at
In 2003, Portland Teachers launched its Fast Track          dealerships nationwide through automated decision-
Equity Advantage program that guarantees qualified          ing. Portland Teachers’ loan staffers call new
members a home equity loan in as few as five business       members who arrive via a CUDL loan to talk about
days (including a three-day right of rescission).           converting to a home equity loan.

The CU also looks to move loans forward without             Schrader estimates the CU books $20 million to $22
a traditional appraisal, which can take weeks to            million monthly in CUDL auto loans and 1,300 in new
arrange. “We fast-track loan requests that qualify to       members. Better yet: New members of Portland
underwriting, which uses either the property’s real         Teachers agree to an average of 3.6 additional
market value or our title company’s automated               services.
property valuation model to verify the principal
balance needed for the loan,” Schrader says. (None
of the home equity loans carry origination fees.)
                                                            Ron Hellenbrand is a home equity product compliance
But all the speed in the world won’t close a loan           research consultant for CUNA Mutual Group.
nobody wants, so Portland Teachers runs with                (ron.hellenbrand@cunamutual.com)
flexibility, too:

      Lending Resource March 2005          • • • Click on the Lending Resource link at www.cunamutual.com