LOS ANGELES - Water and Power Community Credit Union'srelationship with CU Direct has helped the $420 million CU fundindirect auto loans for members out of its main office in LosAngeles. But when Robert Mims and Erwin Ortega learned just howmany first-time borrowers of Latino heritage near the CU'sMontebello branch depended on high interest rate finance companiesto buy cars, the two of them decided the CU needed to supplementits indirect lending relationship with an auto dealer network ofindependent dealers of its own.

Three years after forming its Auto Dealer Network, Water andPower Community CU counts 70 independent dealers in the network.Loans funded through the network are predominantly for usedvehicles, and the average size is $12,000 for a five-year loan.

Since 2003, the Montebello branch where Branch Manager Mims andAssistant Branch Manager Ortego work, has funded more than $35million in auto loans through the Auto Dealer Network, primarily tolow-income, first-time borrowers.

Water and Power CCU's Montebello and Northridge branches wereboth opened in 2002. From July-December, Mims said auto loanproduction from the branches "wasn't significant, so Erwin and Ibrainstormed what we could do."

He continued to explain that the community around the Montebellobranch is about 95% Latino and many of the residents didn't have arelationship with a financial institution, but relied instead onfinancing of about 14%-15% from high interest-rate lenders.

In addition, because of their lack of credit history, most ofthe residents looking to buy a vehicle relied on the independentdealerships in the area, most of which aren't part of the CUDLnetwork.

"We've told the independent dealerships that since we can offerthe member a better rate on their car loan than they were gettingfrom the other lenders, they can afford to buy a more expensive carif they want. Of course the dealerships like that, and that's whythey've joined our network."

By reaching out to the Hispanic community, says Mims, "Thecultural connection has contributed to a deeper sense of communitybetween the credit union, our members and the auto dealers."

Ortega explained that each credit application the Montebellobranch receives for a car loan is very unique, and the loanofficers look at all facets of each application to determine whatthe credit union can do for the member.

"Sometimes a member thinks they can borrow $20,000. We tell themwe can't do that, but we can lend them $12,000, and then we helpthem find a vehicle they can afford. If there's room to helpsomeone, we do," he said.

He added when the Auto Dealer Network was first launched, theMontebello branch offered a program for first-time borrowers thatallowed them to qualify for $15,000 and the CU to underwriteapplications for residents of the community who didn't meet thetypical credit criteria. Ortega said the CU doesn't offer thatprogram any longer, "but we still try to help first-time borrowers.We may require more downpayment on a vehicle or a co-signer on aloan."

When Mims and Ortega first formed the Auto Dealer Network, thetwo expected to visit with 20 dealers and get one or two contractsa month from them. But the program got off to a fast start, and itdidn't take long for the branch to find itself receiving six orseven loan contracts daily.

"After that, a lot of the independent dealers who network witheach other at the car auctions began to spread the word about thenetwork among themselves, and soon they were calling us to join. Soit grew due to word-of-mouth advertising. Now we often findourselves processing up to 10 applications a day," said Mims.

Despite the popularity of the Auto Dealer Network amongindependent dealers in the area, Mims and Ortega screen dealers whowant to join very carefully including things like visiting theirsite and inventory, checking their paperwork, license and thedealership's surety bond for vehicles. They also investigate thedealership's owners and get references.

"The problem for the independents was there was a lot of fraudthat went on that we were aware of. We told them we'll help themmatch a car buyer with their vehicles and assist with thefinancing, but we won't tolerate falsification of information. Wetell them we don't want them to lie because we're going to build along-term relationship with them," said Mims.

The two staffers say they're satisfied with the number ofdealers in the network now-of the 70 dealers 20 are the mostactive.

"When we first started the Auto Dealer Network, we found a lotof people in the community didn't go to the big banks for auto loanfinancing and didn't know what the credit union was about eventhough we had a branch in their community. Many of them never had arelationship with a financial institution before. Now they'vebecome our members, and we're helping them get car loans at moreaffordable rates while offering them other credit union services,"said Mims. [email protected]