In a surprise move, CUNA Mutual Group said last week it has agreed to sell off the assets of its CUNA Mutual Mortgage Corp. to PHH Corp., parent of PHH Mortgage.
PHH has long been a player in credit union mortgages and in fact, provided servicing and originations for CUNA Mutual Mortgage until 1999 when PHH was bought by Cendant Corp.
But Cendant, in one of its regular restructurings, spun off the PHH Mortgage operations and its commercial fleet management business into a separately traded company called PHH Corp., earlier this year. PHH, which is based in Mt. Laurel, N.J., now provides mortgage banking services for as many as 500 credit unions and has a mortgage servicing portfolio of $150 billion, one of the 10 largest in the industry.
Rick Uhlmann, spokesperson for CUNA Mutual, said the deal to sell the mortgage company comes amidst a company-wide review of operations undertaken by new CEO Jeff Post, who took over as chief of the credit union insurer in January.
"One of the reasons that led to the pending sale of the mortgage operations is that we didn't feel we could deliver the core competency to provide our customers with the best services," said Uhlmann.
"For PHH, it's their core competency. We think it (the sale) was in the best interests of our credit union customers," he said.
CUNA Mutual said it expects to eventually phase out all 160 jobs at the mortgage operations in the Madison suburb of Fitchburg, Wis., but hopes to place as many as the employees as possible with the parent company.
PHH issued a brief statement: "We at PHH Mortgage are looking forward to working with CUNA Mutual Mortgage Corporation clients and customers with the conclusion of the planned asset purchase. CUNA Mutual selected PHH Mortgage due to our ability to enhance the mortgage experience for credit union clients and their customers," said Terry Edwards, president and CEO of PHH Mortgage.
CUNA Mutual had been building its mortgage subsidiary since 1999 when it bought out the 50% share of CUNA's CUNA Service Group in the mortgage operation, then later acquired CU Mortgage Corp., a Pomona, Calif.-based mortgage banker owned by 61 California credit unions.
Since then, CUNA Mutual has built the mortgage subsidiary into the leading mortgage bank for credit unions, with relations with 1,400 credit unions and a servicing portfolio of 110,000 loans worth $11 billion. In the last 12 months CUNA Mutual Mortgage has originated about $1 billion worth of loans.
But, noted Uhlmann, most of the relations with credit unions are small, with 95% having just five loans or fewer. The vast majority of the business, 75%, is conducted through about 100 credit unions, he said. "It's not a good foundation on which to build a best-in-class service, something we strive to do," said Uhlmann.
Under the terms of the PHH deal, still being finalized, PHH will acquire certain mortgage-related assets, and assume origination, servicing and sub-servicing contracts. The purchase price was not disclosed last week.
