SAN JOSE, Calif. — The San Francisco Bay Area is a "very crowded" market, with "high competition" among the many credit unions, banks and other financial service companies that are here.
That was the message from Barbara Kamm, president and CEO of $1.8 million Technology CU. She said Tech CU's primary competitors are big banks, which control 80% to 85% of the local market, and the "unregulated FinTech companies" that provide online and mobile applications.
"Our credit union, as with all others, is challenged to differentiate in this market. We feel Tech CU has a niche within the technology community that relates to our 50-year history," she said, noting the CU was founded in 1960 by employees of Fairchild Camera and Instrument Semiconductor Division.
"We feel that history has positioned Tech CU to uniquely understand the specialized needs of consumers and businesses in the San Francisco Bay Area," she continued. "And, our products and services have evolved to meet those needs, from our specialized mortgage products, to business banking and commercial lending, to wealth management."
Among the challenges Kamm listed in competing in this environment: the "general ignorance and misconceptions" among consumers about what a credit union is and what services credit unions offer, and the member business lending cap.
"Unfortunately, the old notions of 'my grandparents' credit union' still persist to some degree. People do not realize how credit unions have evolved to serve their members," she said. "As with all credit unions, we are challenged by the MBL cap. We feel that Tech CU and other credit unions could better serve the business community here if Congress were to raise the MBL to 27.5%."
Delayed Purchase Transaction
Dan Hapner, director of mortgage sales for $1 million Meriwest Credit Union, here, said the extreme competitiveness of the local housing market has led to a new trend as of the last six months. While many home purchases are being made with cash, he said there still may be an opportunity for a CU to capture a loan after the close.
"There is a good chance the cash offers will refinance the property a few months later. They borrow from family or another source to get the property, and once they get the deed they do what we call a delayed purchase transaction," he explained.
In such a case Meriwest will only finance the lesser of the purchase price or the appraised value, to prevent buyers from gaming the system.
"The credit union calls it a refinance loan on our books, but we can give a good interest rate. Buyers are having to get creative in order to qualify as an all-cash buyer because inventory is so low."
There is a great of specialty lending in the Bay Area, Hapner said. Meriwest is part of the Housing Endowment And Regional Trust program, or HEART, through the Housing Department of San Mateo County. It is the only lender that does loans for this program.
"We will do an 80% first, a 15% second and the buyer puts 5% down, and no mortgage insurance," he said. This is available only in certain areas of San Mateo County. We do about 15 per year."
Great Diversity
Kevin Collins, SVP of loan services for $6.7 million Star One Credit Union, Sunnyvale, Calif., said there is tremendous diversity in the region, which makes it different from other parts of the U.S.
"People come from around the world, which is something financial institutions really have to pay attention to," he said.
Star One has seen good growth in auto loans recently, as there are a lot fewer 0% offers from the captives. It has gotten into private student loans in the last five years, and just started student consolidation loans. Other unsecured loans also are growing.
Home equity loans are coming back, even though Collins said some people fear using their equity given what happened a few years ago.
"What really makes the Bay Area unique is credit unions here are really good about cooperating with each other. We help each other," he said. "We share information on products. Certainly sometimes one community credit union might beat another one's deal, but we look at the banks as our competition. They are very aggressive right now."
