Leaders in Lending
Leaders in Lending

Episode · 1 year ago

Transforming Processes to Improve the Retail Lending Customer Experience

ABOUT THIS EPISODE

Around 15 years ago, non-bank financials had about 20% of the share of mortgage originations. Today, they have over 60% of the share.

Why? It’s because they are 100% focused on the quality of the experience.

That’s exactly what banks need to do to get back in the game.

Matt Cammarota, Head of Retail Lending at Liberty Bank in Connecticut, joins the show to discuss why process transformation, in an effort to improve the customer experience, is vital to success in retail lending.

We discuss:

- Strategies for navigating the decline in HELOC balances

- Building a culture that puts the consumer and the institution first

- Transforming the retail lending processes

- Making investments in technology to enable different processes

Want more lending advice? Find us on Apple Podcasts, Spotify, and here. 

Listening on a desktop & can’t see the links? Just search for Leaders in Lending in your favorite podcast player.

We tend to focus a lot on digital experiences and third parties and all of that's great, but it's really hard or you just simply can't digitize the bad process. You are listening to leaders and lending from upstart, a podcast dedicated to helping consumer lenders grow their programs and improve their product offerings. Each week here, decision makers in the finance industry offer insights into the future of the lending industry best practices around digital transformation in one let's get into the show. Welcome to leaders and lending. I'm your host, Jeff Keltner. This week we're featuring my conversation with Matt Camerada, the head of retail lending at Liberty Bank. Matt and I've known each other for a while in the context of the CBA Helock Committee, and we really have a good conversation about the current trends and helocks, what he sees as the future and the way forward and that product and also maybe other products that the experiences and Helock are pointing the way towards for lenders. And we also delve into his efforts to transform the processes of some of the retail lending products and not just kind of make a digital makeover but really fundamentally think about the processes from their core and remake them, and I think it's a really great piece of advice in a conversation for anybody trying to think about not only how do I, quote unquote, digitize my lending or retail banking experiences, but how do I fundamentally improve them from the customers point of view? So very insightful conversation and I hope you enjoy all right, Matt, thanks for joining the podcast. I appreciate it. Thanks for having me. I'm really excited to be here. Jeff, yeah, I'm looking for to this CON versation. You and I have known each other for a couple of years now. Mostly, I think we met in the context of the CBA and the Helock Committee and I've given a few presentations to that group and I'm just kind of curious, as someone who's been in that space for a while, like what's your take on the state of that product, that space in the lending industry overall? Home Equity Lending in general is a really tough place to be. We've been talking about it for years in the committee. Balance is continue to run off. I think in the two thousand and eight, two thousand and nine time frame. They peeked at around seven hundred billion dollars and today it's around two hundred and fifty billion. And that, if you just think about that for a second, it's remarkable. And if you look at the balance sheets of the top thirty lenders in the country, all of them over the last twelve to twenty four months, I've experienced most of them, I should say double digit, but all of them except for three, have experienced home equity balanced decline and it's just it's been a really tough place to be. And there was an article I I was sharing with you earlier, you know, two years ago now, and it said, well, home equity lending ever recover? And maybe the answer is now. You know. I mean if you just think about it, it's way less than half of where it was at its peak. HMM. So what do you what do you do about that as a bank? I mean you look at that, you know you've been responsible for that product, your product owner, balance sheet, owner, business owner. How do you respond to, you know, the lack of demand and an adoption of the helock product? And what do you think is a you know the way lenders should think about that. I'm not that's so sure. It's aid demand. So consumer savings rate is definitely up. How much money borrowers are spending on debt is down. It's actually a historic lows. I was just looking at the debt, you know, financial obligations ratio that the Fed reports, and it's it's still significantly below where it was pre recession. So, for example, household debt service payments as a percentage of income in twenty and two thousand and seven was thirteen percent. Today that's eight percent. And just again think of think about that. Consumers today are spending a lot less of their disposable income on debt service. So household debt service as a percentage of disposable income, thirteen percent, day eight percent. So there there is demand. However, you know, demand is still there for certain products. While home equity balances have come down, personal loans have gone up. So there's really, I think, two things that lenders can do. One, you could either kind of give up on home equity or look at other products like personal loan,...

...or two, you can just look at the home equity experience and try to get back to where we were pre recession, not necessarily from a credit risk appetite perspective, but just from a process perspective. So here's the thing, Jeff, in two thousand and six, seven and eight lenders were originating Home Equity Line of credit in days right, and it was a really great customer experience. Yeah, since then the experience is only gotten worse. I think we're, you know, as dead. What's that's? So that's a little bit of news to me. Like what? I didn't realize it had been so much better. Maybe I've not before I was in the space, if I didn't pay attention. What's happened between then and now that it's actually like I think cycle times are like forty, five or sixty days on average, like they're pretty long. What's driving that lengthening of the cycle? I think it was a few things. I think one it was, you know, a complete overcorrection of the recession, right. A lot of banks just stopped. And from a risk perspective, you know the look when we were doing these in three to five days, there was a lot of knowing coom verification or reactive no income. So Jeff got U Forty score tefenty five percent ll TV everything looks great, you've provided your income backs, but I'm not going to look at them, I'm just going to give it a loan. There was a lot of that, a lot of that going on. There's almost none of that going on. I think we did a recent survey at CBA and I think it was, you know, one out of maybe thirty or forty lenders that said they were doing a little bit of reactive nive. So that you know. I think. I think that's one, but two. I think from a regulatory perspective, Qm and some of the some other regulations have gotten difficult. We talked about this at CBA. I'll give you an example. We as as consumer backs association or we as collective banks, need to work with our regulators to make sure that there is consistent application of regulation. So, for example, automated valuation models, ABM's. Those were used broadly in two thousand and seven and two thousand and eight recession. Happy in it. They pretty much went away for a long time. There are still probably half of the banks out there not in liberties. One of them, right, my prior employer was one as well, not using abms, whereas we were using abms before so I think, not to say that ABM's or the be all end all, but getting an automated valuation complimented by a property condition report for a Fiftyzero long with with really good credit just makes a ten of sense. Yeah, I think Lt you don't you don't want to look too deep. If you got the right LTV, it just doesn't make any sense. So I think. I think it's one you know, making sure that we're getting consistent application from the regulators. But honestly, to I just haven't seen anybody focus on home equity. We had, and I said this a little bit at CBA. You know, we have essentially made the home equity process mere the mortgage process, and so we're doing, you know, drive by appraisals, full a praisals. Were running it, you know, almost underwriting it like it's a fanny Ma loan. Yep, and it's taking two months and so, you know. So again, one you can go personal alone, which which a lot of lenders have, there's no doubt, and personal loans. In the same time where home equity went from seven hundred billion to two hundred fifty, personal loans has gone from like three hundred billion to eight hundred billion right. So personal learning is has has exploded in a good way. Consumers are still being reasonable with with their debt. So that's one. But too and well I'm really excited about doing here at liberty is can't what can we do to the process to get back to, you know, be very aspirational. So, look, we have to go from sixty to thirty. But after that, can I get a helock done in five days or ten days? And that's really what I'm thinking and I'd like to think if I could, if I can get it there, that we'd actually be in a position where we could actually grow originations and actually start to see some balance growth. It makes sense to me that there's a place for that in the market, just like there's a place to personal and probably there's still be a balance of those in the future. But it doesn't feel to me like bunce to go it. I mean, you talked about you can either give up on Helock and an influence only personal loan or strategy to you and kind of get back to prerecession of not better versions of the Helock.

Mean isn't there a both end kind of option here, to which is probably both are are valuable for a lender to be pursuing. Absolutely, and I say that kind of tongue in cheek, because some of the largest lenders in the country have have abandoned the helock program and they may they may be back. But I'll just give you an example. One of the largest banks I had a helock with for ten years. I The draw period was up, I went to renew it. They said sorry, we're not doing them anymore. So so I say that a little bit tongue in cheek, but absolutely and that and that's what I'd like to do right. It's let's fix helock. It's still a good business. I think that they're still an appetite out there. I think that there's still away for helocks to play. It's an interest only pay a minute revolves. A person alone can't do that. I mean, I think the revolving nature. It's a ten year commitment. You know you need thirtyzero relatively quickly. You can take that. You know, if you have if you're in a position where you're getting annual bonuses right and you want to spend some of that money before you get the Bondus, a helock is perfect for that. So there are plenty of revolvers out there. But yes, of course I think that as a bank, you know, liberty, for example, currently does not have a personal loan program or losing out. There's no question. So I think it is a matter of and not or. Well, talk to a little bit now. So you you came to liberty relatively recently from a larger institution. I'm sure people can figure out which if they find you on Linkedin. Happen, it's not blocked by the firewall. Talk a little bit about your decision to move to liberty, why you were excited to come here, a little bit about kind of what you're trying to do from your position there. Sure, I love my prior employer, a great, great place, great people, and it was, as David Glidden, who's the CEO of liberty, has said, certainly not running away from something. It was running to something. So there were really three things that always stand out to me about liberty. One, their reputation in the community is just second to none. They support local organizations. They've been around forever. I mean liberty is, you know, basically a two hundred year old mutual. So they've been in the community, they've been in my backyard for my my entire life, I think, to the culture is just is unlike anything I've ever experienced and they pay attention, strong attention, to fit when they're hiring and recruiting. And so when you get here you see it on the inside. You know everyone you talk to and again, not that this wasn't the case where I was, but it's just different. Everyone you talk to wants to help, everyone you talk to is really looking to do what's best for liberty and that's pretty great. But third and perhaps most important, Jeff, was just the opportunity to lead retail lending. You know, I had a couple of different roles and my prior institution, but that, you know, liberty is again very well known, great product, great people and I actually see that my skills in terms of, you know, leading retail lending and updating their processies will will help significantly, and so it was really the opportunity that was that was exciting to me, the opportunity to potentially build a personal loan program the opportunity to grow mortgage lending and in our in our banking center footprint and to and to grow and expand home ectially lending as well. Yeah, so I want to get to your priorities for the retail Ning sides. At I am collings that that it's not for many banks, not a primary focus the retail ending science. I'm really curious where your where pressure. But I wanted to get your second thing of your three, which was this kind of strong culture and culture of doing what's what's right for the bank. I feel like that's something that in many larger institutions and many financial stations it can become what's better for my career, what's good for my team, not not what's good for the bank, being the thing that people end up focused on. Maybe they would never put it that way, but that's practically speaking what happens. How do you think you maintain and build a culture where people are really trying to do, you know my mind, either right by the company or ideally, even right by the customer, right by the consumer. Even you know, like I'm sitting here, are saying, yeah, I'm going to what's the best thing for Matt, not for for my customer, not for me or the bank as a kind of driving force. I feel like that's it's easy to lose sight up, particularly as...

...you get away from the line rolls where your two or three levels removed from, you know, picking up the phone and talking to a customer. How do you think a culture like that is built it and then maintained over time? That puts it, you know, the consumer in the institution first. It's really tough. I talked a little about it. I think as you're recruiting, you have to just pay really special attention to it. You know, the fit, and I can I can tell you that, as you know, liberty is looking to bring on various executives or even when you know, we're hiring another writer or whomever. Right we're looking at how will they you know, what's you know, what what? What are they like? And what's what will the fit be like? And, you know, do they have that type of approach where you know, I'm going to do whatever it takes to help the team type of thing? And so I think, I think that's that's why I'm but but also, you know, just just making sure this environment exists, you know, top to bottom. You have to have it and I just think it's one of those things that gets really hard. I think you said it. It just gets more the the larger you get, the more difficult that gets to maintain. Yeah, no, it's definitely true and it's it's a special thing when you have it, because you know, if you end up somewhere that doesn't, you realize how quickly it becomes either team versus team, for kind of a game where you're turning the dials and try and optimize something, but it's not, you know, the thing that's best for the company and Peopleho step back and think about what's right for the consumer, what's right for the company, or it's a it makes for a special environment. So let's get to your third point on what broad your liberty, which is the opportunity to kind of leave retail ending. And, as I said, you know, one of the things that surprised me as a consumer, you know, before I entered the finance industry, you know, almost ten years ago now. My all in your actions are as a consumer, and so I think of banks's retail branch, consumer lending, and then you get in the industry and you realize that balance sheet wise, most of them are much more on the commercial side and the retail side is actually not the majority of the business, which is a consumer you don't see, but then you realize in the industry. So I'm curious, as someone who's leading retail ending and was attracted to you liberty because of the the desire to focus on on retail ending at at the company level, what are the areas you're really focused on? Obviously you talk about hello, I can get in cycles timed down, but how do you think about your priorities from a retail ending point of view? Yeah, I think number one is process transformation, and I think that's maybe I'll talk about that later in terms of, you know, advice. But we tend to focus a lot on digital experiences and third parties and all of that's great, but it's really hard or you just simply can't digitize the bad process or you know, at like adding a great online application doesn't really do much if your process is quanky. So it's really transit, and I say transforming, I mean it very like like really taking this to a different level. So mortgages, for example, like we have to. So here's another you know statistic. If you think about it, non bank financials had about twenty percent of origination share about fifteen years ago. Today they have sixty or more. So banks are losing share and that's that's residential mortgage, right. So why? It's because that's all they're focused on and they have a one hundred percent focus on quality. Non Bank financials today, on the residential mortgage side, are getting loans done in thirty to forty five days and banks are taking two months. Customers are taking notice and many, many people that I've known for years that have would traditionally gone to a bank, tried and non bank financial that they never heard of right and said Hey, it's a bank, it's not, it's you know, they're going to sell my bank to fanny may or they're going to see who cares? They're just going to originate. Yeah, and they get a great experience. And so we need to focus on that. So so I believe strongly that by getting our processes to a point our cycle times on mortgage, for example, on a purchase, less than thirty days, they we will have something really, really special to talk about. Our sales teams will have something to talk about, our marketing team will have something to sell. We need to differentiate ourselves other. So you're coming liberty, great, great environment, great community, Great Bank support. Be Community kind. We support the...

...community. There's got to be something a little bit more. Customers need a really good experience, and so that's transforming the process and how we do business is priority number one. I think it's a really critical point because I see so many people focused on digitization and it to your point. I think you said if you digitize a bad process, it doesn't get you anywhere, and I see a lot of that where the digital is the focus and not the experience that you're enabling through the process. And if you don't fix the underlying then like a sixty day process that I interact with through my computer as opposed to a sixer day process I interact through in the branches is not really better for me as a consumer as much as an easier or simpler process. How do you think about the investments you make to do that, because that's both culturally hard, like you're actually changing what people do and I imagine from a technology point of view a lot of systems are built around the current way of doing things and you see you've got a would imagine, a bunch of investment and actually enabling totally different processes. So how do you go about like rethinking those and then enabling a different process to actually take hold? The biggest investment is, honestly, on so we just hired someone that's got great background lean six, Segma, but but someone that's going to lead our transformation office for retail ending. And so, yes, the processes were are the systems were kind of built around the processes, but that doesn't mean you can't fix the processes. So so that's the approach and that's the investment we're going to make first, and we have to make that investment before the tech. You know, we have to invest in that. And it's interesting because I just don't see companies, banks anyways taking this approach. I think some banks may have a continuous improvement program they may have they may be leveraging some of the lean six segment methodologies, but it just doesn't seem to be the norm. I think most of the time it's a band aid process and hey, let's bring in this vendor to do appraisals and let's try this with titles, whatever it is. It's really got to be kind of this true. And then, and you know, almost back to your question about culture, I mean that I give the liberty leadership team a ton of credit. It's I mean, they're trust being what we're doing and they're making the investment and that's that's really significant. And so we've hired someone to lead a transformation office for retail ending. Is going to get started just talking to people and from a change management perspective, and change is tough. What's a little different, however, is I think the last eighteen months have really shined a light on all of the blemishes and I think while change will be difficult, it will be a lot easier because the last eighteen months, especially in the residential orgage and home equally lending space, has been really, really difficult. Yeah, yeah, and I also love your word transformation. Not just a focused on process. I do think too often we we take as a given things that we need to question, and I kind of taw about first principles, thinking how do we like? We always collect x in the process. Will like why and going back and saying, Hey, let's let's actually ask the question of why. We did not just try and like make it easier to finish the process, but like actually question how the process ought to work as a is a fundamentally different exercise and I tend I agree with you. I don't I don't see that exercise being undertaken all that often, versus saying hey, we're going to put in place some tech to speed up the same process or, you know, put a digital fund in on the same product, sess but it's actually back in question, is an in transform that process. I think is a fundamentally different approach and I'm excited to see how that goes for you guys. Thanks. Yeah, again we're being very aspirational. Right, purchase money mortgage. Can we get that ideally twenty to thirty days? Right? Can we get a home equity? And again, aspirational, right, like years from now. Can we get that down to ten days? I mean, you know, and again compared to ten minutes. You know, yeah, but I still think if we have something to talk about, it will make a pretty big difference. I think it'll make a big difference. Certainly have seen in our experience that any amount you can simplify process cut down on time makes a big difference and customers experiences and satisfaction in conversion ultimately was your pull through look like, and so I I'm excited to say that I think. I...

...think you can do it. As a question of it's a question of execution. The capability in terms of what could be done is certainly there. So it's a question of can you? I think the cultural transformation and bringing the the company along with you on that journey is maybe the harder part than, like, you know, studs. I just why I think banks have such a challenge and doing this as it's like a start up comes in, there's nobody, there's no history, there's no long officers done anything, there's no broker that Sunday, there's no real you just start from scratch and transforming it an existing entity and team is a harder part of the process in many ways. And defining the in states you'd like to be at. Not. That'll be the interesting thing if you really have the cultural alignment to do that and can execute on that part. Really good point. Anything you wanted to talk about today that we haven't covered or you thought we would talk about, or points you wanted to make that I didn't do it a good job? Asking about no, I think the only thing it's interesting relative to personal loans. You know, we've been having this conversation of buy build partner for many like I remember it's Tba for or five years ago. We get had a session called, you know. So basically, as a bank, are you going to buy loans? Are you going to build your own program or you going to partner? And it just seems that the way the industry is going, especially with you and your company, like part partnership seem to be the thing in the future, which I just think is is really interesting and you know, I would love your perspective on that. I just don't see many banks trying to go it alone anymore. Well, I think particularly and when I look at personal so I tend to agree. I think personal loans is probably the sharp point of the spear in this in this way, because you really do to be competitive there. It really is minutes, not just to get a rate but to get a loan. And that may not need to be true for helocks or mortgages or some of the more larger, more complex products, right, but for those kind of smaller dollar shorter, you know, to three year, five hundred and ten, twentyzero loans, I think it's true. And that's a level of technology built that's, you know, it's not a it's a real different thing than banks have built. I think it's hard to build, but my my intuition is the buy like just buying loans. It's like it's a real short term strategy, like if you just have, you know, fifty million dollar sitting on your balance sheet that you need to put to work somewhere and you can't generate assets, like okay, you got to buy them the way you go buy t bills or anything else when you've got a treasury problem. But my sense is everybody wants to be a rigid an think they want to be building customer relationships and partnership makes a lot of sense. I think you're finding the fintext that also see the same thing, where partner is their path the future and they're accepting that that's probably better than trying to go it alone. So not all of them their fintext on both sides that, but I think you're seeing, you know, alignment of both fintext realizing partners a good path and banks seeing that as a is a better path to what they ultimately want as well. It's true, it's been interesting because some of the companies that have said, you know, all death to banks have, you know, come around and said hey, how how can we partner with you, which is great, and there's also a new you know, relatively new. You know entrance that are that are just focused on the white label approach. You comment that. I want to highlight your right. You buy loans. There's nothing from a household perspective and we right, we liberty. We actually see it's not just a balance you play, it's a way. You know, we actually want to grow our households. I think we we're looking for nine thousand new households. Like personal loans is a way to do that, for sure. Yeah, it's. I think we see more more lenders looking at what I call leading with lending, where I think the traditional acquisition model is get a deposit accountman cross all alone, and increasingly I think people are realizing you can, particularly through partnerships where there's customer acquisition channels that are in place that are active, like you can acquire households through a lending product and Cross cell the deposit in the other products, and that's a it's a different way of thinking for many institutions, but I think it's one that's that's evolving and emerging right now. I'm man, I got three questions. I used to wrap up interviews with everybody. You know what they are. Next, I told you in advance, but I'll go ahead and ask you these now. So number one, what's the best piece of career advice you've ever gotten? The best piece of advice was making sure I focus on relationships. It sounds so obvious and it's something that I did, but probably not to the level that I did. This is this probably...

...almost ten years ago, maybe seven or eight, where you really have to make an effort, you know, reaching out to people, communicating your strategy, engaging key stakeholders, bringing people along with you, you know, whomever right, whether it's your team, you know, man it up down across you know, your compliance, risk partners, whomever, just making sure that just being open, direct and transparent with with everybody. And it doesn't happen naturally, especially in the last eighteen months. So managing those relationships, especially in the pandemic that has been has been something you have to focus on. But that's probably just make sure, you know. I mean the advice I had was, you know, just spend a lot of time on it, and I have, and it seems like it's paid off. Yeah, usually, however much time you think you need to spend, like double, at a triple, and now you're in the wall park of but you probably need to spend all right. Second question, what's the best piece of advice about the consumer retail ending space you've ever gotten? Ye, I think we talked about it. Don't and I you know I sound like a broken record, but just, you know, lead with process. I think you need to, you know, kind of Transform, fix, optimize your processes again, you know, our PA and and OCR and all sorts of business process management tools are great, but if you have a broken process, they won't do anything for you. So, you know, focus on the process, clean it up, but take a holistic view. Right, the band aid approach doesn't really work. Yeah, I think that. You know, I would say it was starting with the consumer experience, like everything must be in service of that and nothing is a good in another itself unless it's actually improving ultimately, the experience you're delivering to that customer. Absolutely. And then my last question. What's a bold prediction for the future? The bold because I don't know if you'll love this one or now, but my bold prediction is that home equity balances will finally start to get now, look, this is ten a trend that's been it's been like a straight line down. Yeah, you could say it's a very it's almost it's almost shocking how consistent the Klin is, and I do believe it will. I'm going to make a bold prediction that in two thousand and twenty four, all right, two thousand and twenty four, we've got a rebound. Now you know we're going to we're going to have you back and hopefully you're leading the charge on the rebound of Helock balances and the twenty two eight frame. All right. Well, Matt, thanks so much for taking the time today. Appreciate it. This was a great conversation. It has been fun. You have to always fun to talk to you. Thanks. Up Start Partners with banks and credit unions to help grow their consumer loan portfolios and deliver a modern, all digital lending experience. As the average consumer becomes more digitally savvy, it only makes sense that their bank does too. Up Starts ailanding platform uses sophisticated machine learning models to more accurately identify risk and approve more applicants than traditional credit models. With fraud rates near zero, upstarts all digital experience reduces manual processing for banks and offers a simple and convenient experience for consumers. Whether you're looking to grow and enhance your existing personal and auto learning programs or you're just getting started, upstart can help. Upstart offers an into end solution that can help you find more credit worthy borrowers within your risk profile, with all digital underwriting, onboarding, loan closing and servicing. It's all possible with upstart in your corner. Learn more about finding new borrowers, enhancing your credit decisioning process and growing your business by visiting UPSTARTCOM forward banks. That's upstartcom forward banks. You've been listening to leaders and lending from upstart. Make sure you never miss an episode. Subscribe to leaders and lending in your favorite podcast player using apple podcast. Leave as a quick rating by tapping the number of stars you think the show deserves. Thanks for listening. Until next time. The views and opinions expressed by the host and guests on the leaders and lending podcast are their own and their participation in this podcast does not imply an endorsement of such views by their organization or themselves. The content provided is for informational purposes only and the discussion between the host and...

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