LAS VEGAS-Cutting through the seemingly endless tide of bad news in the financial world: some CUs are having success in booking mortgages. In some cases, credit unions are taking advantage of the turmoil that has engulfed their erstwhile competitors, such as WaMu and IndyMac.
At the recent 2008 Fall Leadership Conference of the American Credit Union Mortgage Association (ACUMA), Credit Union Journal asked attendees: What is the current condition of the mortgage market in your area? And, what is your CU doing?
Our market is good, but we are not promoting our mortgages as much as I would like-we don't have enough marketing dollars. The average home price is $225,000 to $250,000. We did not have a big price surge, so there has not been a big fall. I think prices are down maybe 15% from their peak.
We are trying to get out the message that we do mortgages. We have 80,000 members, but many do not realize we do mortgages. In one recent promotion we did jumbo loans at conforming prices, which allowed members to save 3% to 4%. We advertised on radio, TV and billboards and our volume really picked up over the summer.
We just got FHA approved and I hope that helps.
In the San Diego market we are taking 80% of our losses in 12 Zip codes, so we are looking at the number of subprime loans in the neighborhood, the number of REOs and losses. For example, one community in Chula Vista has condos whose loans were not Fannie Mae approved, and values are down 45%.
The New York Federal Reserve prepared a map of subprime loans and DataQuick's numbers. The headlines say San Diego is down 33%, but some areas are down 40%, others are down 20%, and the coastal areas in the northern part of San Diego County are up 1% since 2005. That's not big appreciation, but it is not a decline.
We are very aggressive in purchase mortgages, and we are having a record year. NCUA was in last week and asked for 22 risk factors in lending. We showed them we did make loans in most areas of San Diego, and our average loan-to-value was 70% and our average debt ratio was 40%. It is all about knowing where the risk is.
We are flying below the radar, not really advertising. Our members come in worried about IndyMac and WaMu, so we are telling them about the security and strength of the institution-then by the way, mention we have money to lend. It helps that we are getting good coverage in the local press. The Union Tribune recently ran an article that noted credit unions are not in trouble.
The bad news at IndyMac and WaMu really has brought in a surge of new members. We are close to 200,000 members and $4 billion in assets. That is up from $2 billion in assets just a few years ago.
We are a community-based credit union, and our market is northern Illinois and southern Wisconsin. Home values are declining, but not as severe as in other areas of the Midwest. Our member base tends to have its second mortgage with us, and we are seeing delinquencies rise because of bad first mortgages. We just had our first foreclosure in 78 years, and also are dealing with a deed in lieu from a homeowner that could not pay the mortgage and wanted to avoid court foreclosure proceedings.
Subprime lending is getting the attention, but we are finding property tax valuations are an overlooked problem. Some people were doing lower assumptions on property tax, which is paid in arrears. So at the end of the year, the escrow account suddenly adjusts up by thousands of dollars. Several developers either underestimated or misrepresented tax rates to get people into loans, and now there are several class action lawsuits in our area against them.
We are doing well on mortgages. We recently took processing and funding in house, and we've always serviced our own loans. Banks are not doing very well, which is bringing business to us.
We recently identified 20,000 of our 50,000 members who have a mortgage somewhere else-either a first, a second or an investment property. We've been letting them know we are safe and secure, and then we add the information that mortgages are available. We've also been sending letters to Realtors, telling them we want to help them sell houses.
Our market has been good. We are coming off a strong September, which was double August volume and double the previous September. What happened with Fannie and Freddie, and the big drop in interest rates, gave us a boost on both purchases and re-fis.
Activity mirrors interest rates: when rates are stable, we get nothing; but when rates drop, there is a rush. This tells me people are thinking about buying or refinancing, but are not doing it. We are sitting on $100 million in pre-approvals, so people are shopping but not ready to buy yet.
Home values are still a problem for us. Some pockets in San Jose are still getting multiple bids, but others have lost 10% to 15%. These issues are not even localized, they are sub-localized due to the reputation of the neighborhood, or sometimes schools.
Our sales team is maintaining relationships with Realtors. We had one loan where the buyer originally was with IndyMac, and the loan fell through when the bank had its trouble. We were able to get the docs together in seven days, and the Realtor was impressed. It helps our reputation for Realtors to see us performing well.
