LAS VEGAS-The rest of the mortgage market finally appears to see the value in the long-time credit union model: writing loans that are best for the borrower, not best for the profit of the lender.
That was just one of many messages from Bob Dorsa, president of the American Credit Union Mortgage Association, during ACUMA's recent 2008 Fall Leadership Conference here. Dorsa, a tireless advocate of CUs increasing their mortgage lending share, sat down with Credit Union Journal during the conference to discuss a variety of topics, including the state of the housing market, credit unions' relationships with Realtors and his organization's role in helping CUs succeed.
Credit Union Journal: How are CUs monitoring valuation in their markets, and what specifically are they seeing?
Dorsa: In Southern California, Arizona, Las Vegas and Florida, there still is a severely declining market. A home appraisal still is an important document, and good underwriting means knowing the appraiser, but it is virtually impossible for credit unions to valuate their collateral. However, the days of 100% and 125% loans are over.
It almost appears as if the mortgage market has turned into the credit union underwriting manual. We are the only lender in the industry that put the borrower first-because we have a long-term relationship with borrowers, who are our members. Staying the course is a good recipe for mortgage lending. We are the rule, no longer the exception, as things have come full circle. Credit unions don't do things that are not in the best interest of our members. With subprime lending, it is not as if credit unions got together and made a decision not to make bad loans, we just followed course.
CUJ: Is the increase in CU mortgage lending the result of others pulling out? Will this volume disappear when others re-enter?
Dorsa: The increase is not solely because others pulled out. Of 8,000 credit unions, less than 1,000 are in the mortgage lending business. Therefore, it is a double-edged sword to try telling Realtors about doing business with credit unions, because so many of them say their hometown credit union does not do mortgages. On the other hand, some CUs have great penetration rates.
Perhaps it is a disservice to publicize the fact credit unions as a whole do 2% to 3% of mortgages. If you look at the top 100 credit unions, they are at least double that rate. I would say they have at least 5% penetration in their markets.
Certainly other lenders leaving mortgage lending has not hurt. Today, Realtors are looking more at credit unions because the other options are gone and credit unions are still here. Public trust in mortgage brokers is down, whereas credit unions are seen as trustworthy. We are survivors and are still strong. The loss of competitors has cleared the path to get to consumers. We still have to get the message out, but we don't have to compete with 3,000 lenders.
CUJ: What are CUs hearing from the Realtor community?
Dorsa: Realtors, for the first time in history, are seeking out credit unions. The message is getting to them. Previously, all Realtors were interested in was getting the buyer into a deal, even if the deal was with a shady lender. But when problems hit, people went back to the Realtor angry because the Realtor recommended the lender.
Credit unions, on the other hand, complete happy transactions. This is good for a business that thrives on referrals. Realtors appreciate us more now for staying the course and delivering a quality product.
ACUMA will be doing a presentation at the National Association of Realtors conference in Orlando, Fla., next month. Credit unions, including BECU, Navy Federal and True Home Solutions, which is a CUSO owned by several Midwest credit unions, will talk about who they are and try to dispel the myth that credit unions are anti-Realtor. This effort is important, but the real work must be done on the local level, not the national level. The good news is the ground noise has been removed, and both Realtors and consumers can hear credit unions better.
CUJ: How are CUs handling foreclosures?
Dorsa: Credit unions are being proactive on the whole issue of loss mitigation, and they are handling it with their hearts instead of their lawyers. The people who are foreclosing are their members, and credit unions don't want to see them tossed out on the streets, so there is more of a human touch compared to other lenders. And because credit unions are not in the subprime mortgage business, the numbers are not huge. Many credit unions are seeing ancillary effects-their members are in trouble elsewhere, therefore they are having trouble paying their car loans and credit cards. There is an indirect effect on credit unions, even though we were not the cause.
CUJ: What has been the most effective communication strategy you have seen for making markets aware CUs have money to lend?
Dorsa: There have been many good local community efforts, especially those involving Realtors. Many credit unions have hosted home-buying seminars and "Meet the Realtor" nights. These efforts have to be local, because real estate is local. Every market is different. San Francisco is different from Houston, which is different from Dallas, which is different from Miami. If the credit union knows its local market, it is one step ahead.
I would like to see credit unions get involved in more community activities and charitable causes. Credit unions have a great story to tell, but don't do it for some reason.
CUJ: It is simply a matter of time-perhaps years-before some housing markets recover? What can CUs do until that recovery comes?
Dorsa: In some markets it is going to take a while, especially those that had the largest appreciation. But, there is still immigration as people move to America from other countries, and there are still sales-real estate will not crumble to non-existence. Some areas seem to be near the bottom because investors are appearing. I expect a recovery by spring 2010.
Credit unions need to not sit on their hands. By the time 2010 rolls around there will be consolidation by banks, and the survivors will be stronger. So we need to promote our strengths: being solid and having money to lend. We need to hit on our 100-year anniversary. We are of the people and for the people, and we have been around a long time.
CUJ: What are CUs asking of ACUMA? What resources does it offer?
Dorsa: They are asking us not to deviate from our model, which is to offer networking. We don't sell anything and we don't endorse anything. We will be knocking our socks off to educate the nation's Realtors. Since we added a Realtors spot on our website, I've gotten 45 e-mails from Realtors asking for information on credit unions.
One way to improve relationships is for credit unions to find Realtors among their membership. Those people already know what a credit union is. Making progress is like a political campaign-credit unions need to go out, meet and greet.
ACUMA sends out press releases that are picked up by various sources. For example, Suze Orman recently mentioned us. We want publicity and recognition for credit unions that do mortgages. Representation on every Main Street is important.
