Credit Unions Link Loan and Core Processing Systems

Executives at San Diego-based North Island Financial Credit Union should have been elated at the success of their auto dealer finance program. A tide of new loan applications bore a promise of fat profits.

But NIFCU-which processes loans for 300 auto dealers in San Diego, Orange and Riverside counties-was saddled with a loan system and core banking system that didn't talk to each other. That meant data had to be entered twice-once into each system.

The need for re-keying was causing costly delays. "We needed technology to reduce our data duplication errors," said Bob Campbell, vice president of loan administration at $1.2 billion NIFCU.

The solution lay in connecting the loan system (LoanCenter from Appro Systems, Baton Rouge, La.) to the core banking system (from Open Solutions, Glastonbury, Conn.). LoanCenter resides on an SQL server; the core system resides on a Unix server.

Customer information now flows seamlessly between the two systems. "We no longer have to input borrower data twice, thereby eliminating duplication which can lead to errors, use up dollars and man-hours, and negatively affect our bottom line," said Campbell. Quicker processing, he added, makes NIFCU "more attractive to those dealers, and the results go right to our bottom line."

When a customer applies for a loan, information is manually keyed into the core system. The LoanCenter interface extracts the data and populates the loan decisioning module, which scores loans and evaluates risks based on 50 risk models, including collateral and credit. LoanCenter provides a decision within 15 seconds, after which a contract is created and the loan is booked. Loans are retained in the core system, which controls all payments, processing and specifics on payoff.

Another credit union, Mechanicsburg, Pa.-based Members 1st Federal Credit Union, has also eliminated duplicate data entry and sped up loan processing functions by linking LoanCenter to its core banking system. Last November, Members 1st linked LoanCenter to its Summit Spectrum core system, which has been processing deposits, withdrawals, loans and general ledger reports since 1987.

LoanCenter, which had replaced an aging DOS-based lending system, is used for personal, car, home equity and indirect loans, lines of credit and credit cards.

LoanCenter is available through either a traditional software licensing deal or an MSP (management solution provider) set up, a type of ASP (application service provider) agreement under which data is managed remotely through a secure Web-based connection but resides locally on an in-house database.

"Our research shows that lenders need integrated systems, and we can support lenders as an Internet service provider," said Steve Uffman, CEO at Appro. "More than 85 percent of our customers are opting for ASP."

In the four months following conversion to LoanCenter, NIFCU's loan volume jumped 25 percent over the same period the previous year, without additional employees or paying overtime. "As a result, we now can handle $2 million days routinely," Campbell said.

LoanCenter, he added, is the key to "attracting the next generation of borrowers who do not want to apply for a loan in person, but still have the borrowing needs of our generation."

At Members 1st, not only did the linkage eliminate rekeying of data, but it also enabled automated loan decisioning and credit analysis, which Summit Spectrum couldn't do on its own, said Fred Ryerse, project coordinator for consumer lending at $701 million Members 1st. "This interface uses a tool set that keeps data in real-time, analyzes credit, and qualifies loans, thereby streamlining our loan closing process."

As part of the shakedown process, Members 1st is conducting an audit of LoanCenter's automated decisions.

"All approved loans are pushed to a separate queue that allows us to analyze the validity of the decisions," Ryerse explained. The audit will be completed this summer.

Both NIFCU and Members 1st have installed Appro's LoanLink as the loan processing engine on their online banking sites. For NIFCU, LoanLink will eliminate a third-party batch process that e-mails all online loan decisions to LoanCenter, from where they must be re-keyed into the Open Solutions system.

"By year's end we expect LoanCenter to filter all decisions automatically and populate Open Solutions," Campbell said.

For Members 1st, LoanLink lays the groundwork for enhanced service, and for underwriting loans around the clock via the Internet, Ryerse said.

The newest version of LoanCenter (version 1.5) facilitates cross-selling. "With the help of LoanCenter's credit scoring and decision tools, the cross-selling module will empower our sales team not only to upsell, but downsell as well," Campbell said.