Today’s lending environment puts intense pressure on community banks. There has been a significant influx of new rules and regulations, CFPB requirements, enforcement and the potential for costly penalties and fines for non-compliance. In addition, the market is experiencing fluctuating rates, origination volumes that are declining, refi’s that have diminished and a shift to the purchase market is in full force. These current conditions provide a daunting task for community banks as they look to navigate these challenging mortgage market conditions.
Compliance poses probably the biggest challenge to community banks. In testimony to the House Subcommittee on Financial Institutions, William B. Grant, Chair of the American Bankers Association Community Bankers Council told members that a conservative estimate of the cost of compliance to community bankers was approaching 12% of operating costs, and that was in 2012. With that big of an impact on the bottom line, it is imperative that community banks partner with knowledgeable service providers for help to keep them ahead of the compliance curve without incurring fines or paying extravagant legal fees.
Add in a highly volatile market where origination volumes are declining and margins are tight, that makes it challenging to sustain profitability. In spite of the predicted lower origination volumes, all is not doom and gloom for community banks and their lending departments in 2014. Due to the nature of the relationship that community banks have with prospective borrowers in their community, they are in the perfect position to capitalize on the shift from refis to the purchase market.
In our case, Chelsea Groton Bank is an independent, mutually owned, community bank serving Eastern Connecticut. We are deeply committed to delivering on our promise of providing the highest level of customer service to our clients and to the community. In part, that meant lowering lending costs, speeding delivery and offering timely loan products that are both borrower and market friendly. To be able to deliver on that promise and to effectively respond to today’s market conditions, we outlined a plan to achieve our goals.
The first step was to develop a strategic partnership with a technology provider who could help us successfully navigate the shifting market challenges that included an increasing compliance requirement and a shift in origination demand. The second step was to employ technology solutions that provide flexibility to proactively adapt to changing markets while promoting efficiencies and improving customer service levels.
So what does the right strategic partner look like? For Chelsea Groton, first and foremost, the right strategic partner had to offer a level of commitment well beyond the vendor offering mere software and help-desk services. The right strategic partner had to deliver a flexible, refinable lending platform for all types of loans, proactive compliance solutions and an exceptional commitment to support and service.
For a community bank, having one common platform for consumer, residential and small-business lending can deliver a tremendous competitive advantage. This alone significantly increases efficiencies throughout the entire enterprise. One platform eliminates the need to switch between systems and saves time and increases quality by eliminating the need for redundant data entry. The need to train and maintain multiple lending systems is gone and cross promotion of loan products is simplified. This allows for key bank resources to spend less time preparing loans and more time increasing the customer service levels that their customers have come to expect.
Compliance is now a business imperative for all lenders. Community banks understand that they need a proactive, responsive, and most importantly, a collaborative compliance approach and often look to their strategic partners for help. The strategic partner should provide extensive lending and compliance expertise that closely monitors all regulatory actions, including the GSEs. Having a partner that has extensive insight and on-going relationships with the GSEs along with a proven history of delivering fully tested and advanced solutions prior to regulatory deadlines provides risk mitigation for the community bank.
The ability to easily customize and make changes in the lending platform is critical for today’s community banks. It is necessary that their technology provide the ability to rapidly respond to constantly changing market conditions. Capabilities such as customized workflow, the use of data-quality checks, and creating special loan products ahead of market changes result in loans delivered more quickly for less money. Enough cannot be said about how the endless possibilities offered in a flexible lending platform helps increase the level of customer service that can be delivered.
For community banks to truly deliver the support and service that their customers demand they, in turn, must have a strategic partner that not only delivers a high level of support, but they must have an understand as to what community banks need to thrive in today’s market. Their knowledge of your operation, your requirements and the business world around them is vital to a successful relationship. The strategic partner has to have a skilled, highly trained and experienced staff of professionals who are there to help every step of the way and are available at any time.
While there are many challenges in today’s lending environment there are also significant opportunities for community banks such as ours as the market shifts from refinances to the purchase market. To be able to do that is takes a strategic partner that shares the same belief and commitment to serving the needs of its clients.
About The Author
Dawn Marie Day is Vice President, Retail Lending Operations Manager at Chelsea Groton Bank. She develops and manages Chelsea Groton Bank’s retail operations, closing and secondary marketing areas to increase market share and system efficiencies. Chelsea Groton Bank employs the PowerLender Loan Origination & Processing System by Associated Software Consultants, Inc.