WEST PALM BEACH, Fla. — While other lenders have backed away from making new mortgages-and in some cases even closed up their mortgage shops-credit unions have jumped into the market with both feet.
Indeed, in a recent Credit Union Journal online poll, when credit unions were asked where they see the greatest lending opportunities, 50% tapped mortgages, with auto lending in second place at 24%, member business lending at 14%, unsecured lines/consolidation loans at 8% and credit cards at 4%.
It would seem, several experts suggested, that credit unions have finally recognized the opportunity at hand with mortgages.
"It's about time everyone gets it. I've always felt this is the perfect opportunity," said Bob Dorsa, president of the American Credit Union Mortgage Association. "For some reason, we've never picked up the enthusiasm to what it should be. I'm really not surprised that others are finally realizing it."
CUNA Mutual Group Chief Economist Dave Colby agreed. "This time is a great opportunity for credit unions. There's still over 133 million people working. Not everyone is in Florida, California, etc."
And while much of the news surrounding the tanking economy has been gloom and doom, Colby said the credit crunch "has been a boost to a lot of first time homebuyers. Interest rates are at historic lows," he said. "It's a tremendous environment now for those taking care of their credit, and saving up a little for their down payment. I think credit unions can capitalize on this opportunity."
Others who are taking advantage of "historically low interest rates," Colby noted, are "older people with a lot of equity in their house."
Colby said those in particular are "risk-free" for credit unions, as most of these homeowners have at least 60% equity in their home and are "not going to just walk away."
The turbulent times are driving consumers into the arms of credit unions, suggested Linda Clampitt, senior vice president for CU Members Mortgage.
"I think there's a huge flight to safety," she said. "People want to work with who they can trust. Credit union members feels credit unions are looking out for consumers' interests more-so than say, a broker."
Mike Schenk, CUNA VP of economics and statistics, said that the reason for this is that credit unions have a lot of capital, and "are more likely to stay in the game."
"Credit unions are in better shape than banks and have the ability to be in the marketplace," Schenk said.
Colby said he expects this trend to continue for some time. "The mortgage opportunities will be there," he said.
Schenk also expects it to continue "because rates will continue to go down."
Clampitt agreed. "I think it will continue as credit unions get better at their marketing or telling their story," she said. "Many people don't even know that credit unions do mortgages."
It's important to get the word out, Clampitt said, adding "if your member has a mortgage loan with you, you will become their primary financial institution. It brings a big opportunity-once you get the mortgage, you can cross sell."
Time is of the essence, Clampitt stressed.
"I do think that once the economy improves and gets better, time is limited for credit unions to make a difference," she said. "And so I think there is a window of opportunity — 12 to 18 months — for credit unions to tell their story."
Dorsa agreed, explaining that 95 out of 100 credit union members still have their mortgage loans somewhere else.
Dorsa noted that the trend will continue, as long as CUs are vigilant about getting word out there.
"Sometimes I'll ask a waiter if they are a member of a credit union and they look at me blankly," he said. "We need to spread the word. One thing credit unions are in dire need of is younger members. I'd like to see a 'Got Credit Union' ad like the 'Got Milk ad.' Or a creature — like the duck from Affleck or the gecko from GEICO. I think the future is more optimistic than ever."
But there is a potential cloud to all of this silver lining-as credit unions get more and more into the mortgage market, might they not fall prey to some of the same problems that have haunted other providers? "Hopefully credit unions are going to be able to accommodate this as much as possible, and then sell into the secondary market," he said. "We might see a lot of volume but little portfolio growth-unless we get some tremendous asset growth."
Clampitt agreed this is a possibility. "But I think credit unions are getting more educated," she said. "I think they're doing a better job. I think more and more credit unions are realizing the need to have more than one product."
Dorsa said credit unions are now "being forced to make some decisions."
"Be careful who you outsource to," he said. "This is where it gets a little more complicated. With the fact that we have such a huge opportunity, kind of gets credit unions to be able to decide which loans they want to carry and which they want to put into the secondary market. But the upside outweighs any risk."
The poll aspect that did surprise Colby was 24% auto. "Auto rates are difficult to compete with GM and others offering 0%," he said.
Schenk also said that the current demand for cars is "quite low."
"Many families with two, three, four cars are finding in tough economic times saying 'We don't need so many cars,' or they are hanging on to them longer. People are nervous. The job situation is bad. People aren't looking for new cars in this market."
