AUGUSTA, Maine. — With predictions a purchase-mortgage boom is headed credit unions' way, Ira Oskowsky, regional sales director-Eastern sales division with CMG Mortgage Insurance, offered these pointers during the Maine league's recent annual meeting:
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- Every CU's goal should be home preservation and counseling members at risk.
- First-time homebuyer programs nationally are largely gone, even though there remains "plenty of first-time homebuyers who are good risks. Look for ways to lower downpayments without increasing risk."
- Fannie Mae and Freddie Mac are in no position to support a major increase in purchasing mortgages, so other secondary market opportunities must be explored.
- Many CFOs are sitting on deposits and putting them into low-yielding investments. While CUs can't match-fund, said Oskowsky, they can invest dollars into more profitable mortgage programs.
- Similarly, he said, more CUs should portfolio more loans. "CFOs are concerned about risk and other issues, but it may be your only alternative to funding loans. Portfolio loans should not be a dumping ground for problem loans. It should be just the opposite; your best loans should be in portfolio."
- The better educated the member, the better they perform and the more products they purchase.
- Credit unions have never been particularly good at the purchase market, but that market is about to "take off."
- Create conservative products, with fewer choices and no gimmicks. "It's time to get back to the 1980s and dig deep into the application," he said. "And not everyone has to have a home."
- Decrease reliance on automated underwriting. Get or gain the expertise to underwrite.
- Consider modifications vs. refinances: serve the member. Half in the room at the Maine league meeting said they are doing mods. "Modification is a vital alternative now to foreclosures and to refinances, because some people cannot refinance," he said, stressing this is for existing mortgage loans within the credit union. "If it's for an existing loan at a bank, I wouldn't consider it. You don't want to bring in another bad loan."
- Regularly review the existing portfolio. "Loans used to come into the portfolio and it was like a black hole; no one every looked at them again. Speak to members and find out how they're doing. If they're late, even by one day, pick up the phone."
- No LTV loans at 100% or more. "Frankly, try not to do to much at 90% or 95%. Members should have some skin in the game. If they feel all of their value has disappeared, they may choose to walk. That's not going to change in the future."
- Be prepared for the mortgage loan to go bad. "How are your collections efforts/loss mitigation? It can save your credit union."
- Once you sell into the secondary market, don't assume it won't come back to you. And when your members get MI, don't automatically expect that the MI company will pay all claims."
- Sales people should not be compensated on bringing in any loan, but quality loans.
- Create an internal mindset of loss mitigation during the loan process.
