LendKey’s Vince Passione makes the most of an interesting market

As Loan key celebrates $ 500 million in funded loans, there’s plenty more to celebrate too, co-founder and CEO Vince Passione noted.

Passione said that as the country emerged from a year of pandemic, there were many encouraging signs. Education loans are rebounding, as is the refi market.

Increased home improvement

LendKey began operations as the world faced the fallout from the latest crash and they looked to those experiences for clues as to what would happen this time around, Passione explained. Then there was a flight to quality and entries to safer investments and credit unions. Loan-to-deposit ratios had fallen to 75 percent and credit unions were looking for new sources of quality loans.

Passione and her team looked at their experience from a decade ago and also spoke to industry professionals who have also seen an increase in interest in upcoming home improvements. As people got used to working from home and leaving cities, they were likely to invest in their homes, especially swimming pools and spas. This trend started to show in April and accelerated in May.

“It’s no surprise to us,” Passione admitted. “We kind of predicted that when we got into the pandemic, people were going to take shelter in place and stay in their homes and want to make improvements to their homes. “

This demand continued into the off-season as people are still trying to schedule facilities, Passione added.

ALIRO at the service of success

LendKey’s Indirect Lending Program ALIRO was another key success factor, said Passione. Originally a private transaction network for loan buyers and sellers, ALIRO has been expanded to include fintech lenders and loan markets, who now have access to the balance sheets of credit unions and community banks. To date, LendKey has facilitated over $ 2 billion in education, education and home improvement loan sales. Coming soon, auto refi and solar loans (more information below).

Again, LendKey looked to 2009 and its roots in providing a loan-as-a-service product, Passione said. Ten years ago, there was a strong demand for performing assets and fintechs have long demanded access to credit union balance sheets. These credit unions also wanted to diversify their balance sheets by keeping some tranches, selling others and thus diversifying their own balance sheets. However, most of the time, these transactions were one-off transactions.

What if LendKey could build private networks for initiators? Passione and her team spent time with non-bank originators, explained how the system works, and began to see a heavy flow of transactions.

“We now have a good pipeline of deals online and I think it’s good for the industry,” Passione said.

Questions persist about the ability of the limited supply of new homes to stimulate mortgage origination, which is also pushing institutions to look elsewhere, he explained. The appeal to them is clear, as they can hold onto slices while selling the rest and buying others in new geographies and mitigating risk.

“By doing this process, they still get the same number of origins, but they bring them through a much more diverse population,” Passione said. “Credit unions need loans right now. Their deposits increased 14% to about $ 1.7 trillion, but about $ 750 billion is not being invested at this time. “

“They can’t get enough cars, they can’t get enough mortgages, they can’t get enough mortgage deals, so they’re looking to buy loans from others as an investment.”

Auto loans

Another hot sector of the market is auto loans, Passione said. While two years ago there were around 17 million new car sales, that number has risen to between 11 million and 12 million today as shortages of chips and other factors drive up the value of cars. used cars by 30%.

It has also led to an increase in leasing, as participants can be confident in the residual value of a vehicle when they return the car at the end of the lease, he explained. Expect this shortage to last for some time as car rental companies join the queue for new vehicles after selling off much of their inventory at the start of the pandemic before being caught off guard when demand returned.

Solar loans will be a bright spot

Passione said he expects solar panel loans to become very successful quickly when they become available in the coming months. They tick a lot of boxes, including environmental responsibility and consumer demand, but they have suffered in popularity for several reasons.

One of the most important is a confusing patchwork of network financing and resale systems that differed from state to state. Thank the industry for seeing this and introducing long term financing for up to 25 years that brings the price down to the value of a utility bill.

Credit unions have low cost of funds and good relationships with small businesses

“As the creators of solar energy needed access to longer-term finance, the partners in the credit unions made sense,” Passione said.

New technologies

Passione said robotic process automation (RPA) offers the opportunity to improve service. Although much of the loan origination process is already automated, users still need to move data from one system to another.

RPA can help automate remittances and check processing. By automating these procedures, institutions can improve accuracy and speed. Artificial intelligence can be deployed as part of a multi-variant decision model to better understand creditworthiness. Such models can also identify customers who are most serious in obtaining loans, as LendKey has over a decade of applications and data on which to train these systems.

“It’s really interesting to see how we can use AI …

In such a system, staff can be redeployed into higher value-added tasks that will further motivate them and produce satisfied customers, he added.

“Right now that’s what interests us most – eliminating these mundane tasks by allowing my staff to focus on things of great value and when they’re very relevant,” Passione said.

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David A. Albanese

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