Managing an MBL Program: In-House or CUSO? October 31, 2016
Dale S. Frankhouse, Jr. Director of Business Services Sun Federal Credit Union, Maumee, OH
Sun Federal Credit Union • $482MM in asset credit union • 32,000 members • Based in Toledo, OH area with offices in Philadelphia, PA • $30MM in commercial MBL • 60% self-originated; 40% participation purchased • MBS launched in 2008
Sun Federal Business Services In-House – 3 FTE team • Director of Business Services – Manage & BDO • Business Services Specialist – Analysis, Processing, Closing, Inside Sales • ½ time of BDO (in Philadelphia) and a Lending Account • In-House Loan Products • 1-4 Family Residential Investment Properties • Term Loans – Vehicles, Equipment • Lines of Credit – up to $100,000 • Business VISA Credit Card • CUSO • Commercial Real Estate - Multi-family Residential, Mixed Use, Hotels, • Construction, Larger Line of Credit • Other Collateral – Inventory, Receivables •
Benefits of Using a CUSO • High-priced expertise for a fraction of the cost. • Syndication - Opportunity to buy and sell participations. • Regulatory Compliance Assistance. • Training Opportunities for CU Staff. • Shared BDO Model* • A la carte services available; when CU lacks expertise, is short-staffed or is slammed. * Available through Cooperative Business Services in certain markets.
Vetting an MBL CUSO • Learn their philosophy and culture. • Review their scorecard to determine their track record. • Know the breadth and longevity of their team. • Meet and interview their team at their office. • Learn about their process – underwriting, processing, closing, servicing, risk rating, annual reviews, and loss mitigation. • Request and check their references.
Learn their philosophy and culture. • What is their lending and service philosophy? • How does their philosophy compare to your CU’s? • What is their culture? • How might differences in culture create challenges?
Review their scorecard to determine their track record. • Review their financials. • Size of their portfolio? • # of loans underwritten? • Details on their delinquency - #, $, Historic? • C/O loss to CU’s, originating or participating?
Know the breadth and longevity of their team. • What is the make up and background of their team members? • How is the CUSO organized; what departments to they have? • Is their staff stable and seasoned or is there a lot of turn-over?
Meet and interview their team at their office. • Seeing their office is just as important as your BDO’s visiting a potential business member. • Visiting them allows you to meet and interact with more of their team. • Facilitates specific questions answered by SME rather than sales staff.
Learn about their processes. • Review their MBL Policy. • Inquire about their processes for underwriting, processing, closing, servicing, risk rating, annual reviews, and loss mitigation. • Ask questions for understanding and clarification. Questions like: Does a CUSO representative conduct a site visit/inspection for new commercial collateral? Who attends closings on behalf of the CUSO? Tell us about the correspondence the CUSO sends to business borrowers for loans they service.
Request and check their references. Don’t take their word for it, talk to their subscribers/clients. • Ask if they consider the CUSO a strategic partner. • Ask if they consider the CUSO a trusted advisor. • Do they do what they say they will do? • Ask what things they would change about the CUSO if they could. • Make sure to ask whether they would sign with them again if given • the opportunity.
Sun Federal’s MBL CUSO Partner is:
• Started in 2003 in Cincinnati, OH • Serves 91 Credit Union in 11 States • 30 Team members with over 176 years of industry experience • Has reviewed more than $2.5 billion in loan opportunities
CBS -Services Offered • Loan Origination • Credit Underwriting and Syndication • Loan Documentation • Loan Closing • Pre/Post Closing Loan File Audit • Loan Servicing • Portfolio Management • Loss Mitigation • Risk Management/Risk Analytics • Shared Business Development Officer Models
CBS –Financing Products • Conventional Commercial Real Estate Acquisition/Refinance/Expansion • • SBA Lending 7a • Express • 504 • • Term Financing M & E Purchase/Refinance • • Construction Loans Conventional or SBA 504 Programs • • Lines of Credit
Shared BDO Model Group of CUs in a region agree to share the cost of a BDO hired/managed by CBS to seek out business opportunities within the region. One of the CUs serves as lead on each deal and CU partners have right of first refusal to participate up to their agreed %. • Concept launched in 2006 • CBS currently has seven active BDO Models • Approximately 70% of CU clients are part of a Shared BDO Model. • In NWO, 8 CU partners. BDO closed $25+ million in 2015 and will exceed that in 2016. • Partner CUs can continue to also originate their own deals or they can choose to refer them to the Shared BDO.
How Sun Federal has benefitted from working with a CUSO • Tiered-pricing model rewards active originating and participating • Expertise for a fraction of the cost of building a larger MBL department. • Established and fostered engaged business relationships by serving as lead CU on Shared BDO originated deals. • Diversified our portfolio by participating in deals originated in other regions.
Final thoughts on working with a CUSO • Our successful CUSO experience is attributed to the depth of the relationship and the level of collaboration we have built with our partner. • Part of our success has been our active role in buying and selling participations. • We have worked over the years to build relationships with other CUs working with CBS which has proven helpful when reviewing participation opportunities and needing additional insight. • As in most of the things we do, relationships make the difference !
Questions? Contact Information: Dale S. Frankhouse, Jr. Sun Federal Credit Union dale.frankhouse@sunfcu.org 419-794-7420
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