WASHINGTON - While other mortgage lenders are shutting down, credit unions are rolling out the welcome mat, with mortgage originations skyrocketing 53% in the first quarter of 2008 compared to the same time last year, according to Callahan & Associates.
“An upheaval is occurring in the economy. Secondary markets are closed and institutions are failing or withdrawing from whole areas of the economy. This channel destruction is especially evident in mortgages. We will not return to the ‘status quo,’” said Callahan’s President Chip Filson. “This is a revolution; consumers want trusted relationships. “Most importantly, credit unions are winning this revolution.”
Indeed, that 53% increase in credit union originations came at a time when national mortgage volume dropped by 7%, Callahan’s said, noting that CUs also had the highest-ever first quarter total loan originations at $61 billion, and CU’s average ROA of 60 basis points exceeded all other financial institutions.
As credit unions pursue the goal of taking their 2% of the mortgage market to 10% by 2010, Credit Union Journal asked successful mortgage-writing credit unions to share strategies they are using to make the most of this mortgage revolution.
RIVERMARK COMMUNITY CU RECRUITS MORTGAGE VETERAN TO HELP CU TAKE ADVANTAGE OF VOID CREATED WHEN OTHER LENDERS BEGAN BACKING AWAY FROM MORTGAGES
BEAVERTON, Ore.–When Gayle Rust Gustafson, vice president of financial services for Rivermark Community Credit Union, saw the start of the subprime market crashing last year, she knew it was time to reach out to help their members. She also knew the mortgage opportunities were out there for the 42,000-member credit union.
“Half of our competitors closed their doors,” said Gustafson, who also serves as a committee member of CUNA’s Lending Council.
“We hired a mortgage development officer,” she said. “He came from another lender who was doing a lot in the subprime market.”
The result?
“I do think we have a story to tell here,” Gustafson said. “We have more business than we ever dreamed of. We put the word out anywhere we could telling people ‘We’re here to help you,’–the web, our newsletter.”
Though there were and still are mortgage opportunities in Oregon for credit unions, Gustafson admitted there may be more opportunities in other states.
“Oregon has been less affected by home devaluation,” she said. “The market here is not as bad as it is in California or Florida.”
For other credit unions hoping to cash in on this opportunity, Gustafson suggests following in Rivermark Community CU’s footsteps.
“It makes a world of difference to get someone who really knows the mortgage business–like we did,” she said.
“You also have to have a good program. You also have to have a good staff,” Gustafson advised. “We have all that. It was just a matter of getting someone who could get the word out. There is a lot of business out there for credit unions. We had stated an objective here to increase the number of members who have a mortgage. We’ve quadrupled our mortgages. We’ve had to hire an additional processor. It’s beyond our wildest dreams.” -Joyce Moed
CREDIT UNIONS OFFER STRATEGIES FOR BUILDING SHARE OF MORTGAGES
Get Out Of Your Comfort Zone And Consider FHA, VA Loans
TACOMA, Wash.–It may be time for credit unions to get out of their comfort zones a little and delve into FHA and VA loans, one credit union loan officer is suggesting.
“Credit unions have a tremendous opportunity to reach out to members with sound mortgage products and advice, and this opportunity opens the door to expand our market share,” said Carl Roer, VP-lending for Sound CU here. “There is a huge opportunity in government lending for credit unions, specifically FHA and VA loans. Many credit unions have avoided these complex loans in the past and now struggle with finding training and quality sponsor lenders. FHA loan products allow credit unions to offer high LTV loans to members with marginal scores, and the loans can be completed via wholesale lending channels mitigating portfolio risk to the CU.”
A member of the CUNA Lending Council, Roer said CUs can afford to be more innovative with their mortgage loans, as long as they have a safety net–and that net can take the form of the HLPR program, balloons and ARMs.
“Many credit unions are leveraging their portfolio dollars by offering innovative products not traditionally seen or used in the secondary market,” he observed. “Some of these loans do not meet Fannie Mae or Freddie Mac requirements, and the credit unions intend on keeping these loans on their books. In order to do so safely, the credit unions add balloon or adjustable rate features to protect them from inherent interest rate risk. Some unique credit union products include the HLPR loan, a CUNA initiative where credit unions offer low down-payment loans with reduced fees and limited or no mortgage insurance. These loans take many forms, including 30-year fixed or 3/1 ARM product types. Many credit unions are leveraging longer-term adjustable rate products to help members, as long-term pricing continues to rise to high levels. Many CUs offer 5, 7, and 10-year adjustable loans with below-market rates and fees.” -Joyce Moed
WANT MORE MORTGAGES? MAKE IT YOUR CUS’ FOCUS
SEATTLE–If credit unions want to make the most of the opportunity that has opened up as other mortgage lenders have gotten out of the market, the key is to set some goals and really focus on mortgages, according to one lending expert.
The ironically named Gary Fee, vice president of member operations for BECU, and member of CUNA’s Lending Council, advised credit unions to make mortgages a primary focal point and back it up with strong marketing.
“Credit unions that focus on mortgage lending and market the fact that they are a viable source of stable mortgage funds can do well in today’s market, even with slowing application volumes,” Fee said. “I can tell that from my perspective, credit unions have tremendous opportunity in mortgage lending in this market. I say this because many of the mortgage brokers and lenders have gone out of business or their lending capabilities have been severely restricted because of investor resources and portfolio issues. Credit unions–or at least the majority of them–did not get involved in subprime or risky lending and are perfectly positioned to fill the gap left by those leaving the market.” -Joyce Moed
GETTING WORD OUT TO MEMBERS, REALTORS IS THE KEY
LITTLETON, Colo.–Mortgages may be slow going at other financial institutions, but at Colorado Credit Union here, the mortgage department “is going crazy right now. We are originating more than we ever have before,” according to Karen Moran, vice president of lending/collections at the $83-million credit union.
Colorado CU is reaching out by meeting with Realtors and attending community events, Moran said, but even that may not be necessary for the credit union.
“It seems the word is out that we can help with mortgages and more members are coming to us because they know they can trust us,” Moran said.
Moran, who is also a member of the CUNA Lending Council, said that all staff members are constantly being trained to listen to questions from members regarding adjustable payments, moving, upgrading/downgrading, etc. and then are referred immediately to an originator.
“The amount of bad publicity out here in Colorado has really helped drive people to ask a stable institution versus a broker for information and assistance,” Moran said. “A lot of Realtors out here won’t accept a pre-approval letter unless it is from a bank or credit union.”
Moran offered some advice to credit unions.
“Get the word out to members, the community, and friends and family, and the referrals will come,” she said. –Joyce Moed
FLIGHT TO QUALITY OPENS BIG WINDOW
LAS VEGAS–Reach out and touch someone–again and again.
That’s the message from American Credit Union Mortgage Association President Bob Dorsa, who said that now that credit unions’ time has come in the mortgage market, CUs will have to be more aggressive about getting the word out about their mortgage lending programs.
“The opportunities are massive if you look at what has transpired in the past 12 months,” he said. “We’ve been talking about this stuff for 20 years, but nobody listened to us because there was so much competition.”
But that is all changing, Dorsa noted.
“I think what we’ve been focusing on now is the flight to quality,” he said, noting that the opportunity is two-fold–to solidify a mortgage relationship with existing credit union members, and to appeal more to non-members or first time credit union-members.
“One of the most common themes is the fixing the broken arm theme,” Dorsa said. “We are also seeing more credit unions doing business with FHA. They’re reaching out to first-time homebuyers to get us into the playing field.”
The one drawback to getting the credit union name out there, when it comes to mortgages, is that about half of credit unions do not write mortgage loans, Dorsa said, which can make it difficult when trying to get the word out about mortgages and credit unions when trying to pitch CUs as an industry.
“It’s very difficult and confusing in some respects,” he said. “But it’s been a great opportunity to tell our story–not just about mortgages.” -Joyce Moed
ST. MARY’S BANK INVITED TO JOIN STATE’S COMMUNITY LOAN FUND INITIATIVE
MANCHESTER, N.H.–St. Mary’s Bank has announced that it is one of two lenders making single-family mortgages available in New Hampshire resident-owned communities as part of a nationwide New Hampshire Community Loan Fund initiative.
St. Mary’s Bank was invited by the Loan Fund to offer a special mortgage program as part of its national demonstration project aimed at making affordable financing available in manufactured home communities.
Previously, manufactured homebuyers and homeowners had few options when it came to financing, and often had to resort to shorter-term loans with higher interest rates.
The availability of favorable credit terms not only serves to improve the affordability of homes in resident owned communities, but also to increase property values and improve salability, according to a 2006 study by the Carsey Institute at the University of New Hampshire.
To be eligible for financing from St. Mary’s Bank, residents living in a manufactured housing park must first apply as a group to Fannie Mae to achieve formal status as a resident owned community. –Joyce Moed
For More Information
www.rivermarkcu.org
www.acuma.org
www.becu.org
www.ccu.org
www.soundcu.com
www.creditunions.com
www.primealliancesolutions.com
