MANHATTAN BEACH, Calif.-Since expanding its wholesale sales force earlier this year, Kinecta FCU is reporting it has been able to maintain mortgage loan volume despite a drop in the real estate market.
The $3.4-billion CU that serves more than 220,000 members across the U.S. said having a "national presence" was its ultimate goal. Kinecta grew its operations from a base of 25 states and entered Idaho and Utah in the West, and Maryland, Virginia, Wisconsin and the District of Columbia in the Midwest and East. It services these states through its West Coast and Midwest operations centers, located in El Segundo, Calif., and Rosemont, Ill., respectively.
Brian Robinett, who oversees Kinecta's mortgage lending division and carries the dual titles of SVP and chief credit officer, said prior to the downgrade of U.S. debt, lending was going well. Since that time the real estate market has declined somewhat, although the CU continues to see strong refi activity as some members take advantage of low interest rates.
Including new hires, Kinecta now has more than 30 account executives, Robinett said: 10 in Southern California/Arizona, 10 in Northern California/the Pacific Northwest, 10 in the upper Midwest and two in the Northeast.
"Expansion is happening," he said. "We expect the same volume in 2011 as in 2010: $2.5 billion in mortgages booked. If we had not expanded our sales force we would be down 35% to 40%. The expansion has allowed us to keep our volume constant year over year in a declining real estate market."
Asked if he thinks interest rates will fall further, Robinett quipped: "If I knew that, I would be living on a yacht in the Caribbean right now."
Rates are at historic lows due to what is happening in Europe and other places, he said. Robinett put the chance of rates going lower as less than the odds of rates going higher, adding, "but I'm not an economist."
REOs Are Biggest Challenge
The biggest headwind to recovery in housing is the large number of real estate owned properties on the market, he asserted. "No one wants to buy a house thinking the value will be less one month from now. Once we can work through the REO issue, there are a lot of people who want to buy houses who are waiting and the market will come back very strongly at that point."
When Kinecta is pricing mortgages, including closing costs, the goal is to be "very competitive" in its complete value proposition. Robinett said price is one part of the picture, along with offering a service level that makes the process as member-friendly and seamless as possible.
"We sell a lot of our loans, especially our 30-year loans, so as the market moves we have to move with the volatility, but we try not to change our rates interday."
Because its service area includes California and Arizona-two states that have been inundated with short sales and foreclosures-risk assessments on properties and comparables requires a full appraisal process. Not all properties and borrowers will qualify, Robinett said, especially considering the underwriting criteria "certainly has changed from four or five years ago."
"But having said that, a number of people do meet criteria-more on the lines of how it was 10 years ago," he said. "We try to make every deal for members who qualify for a loan, but we can't do every loan if there is no equity or we can't get mortgage insurance."
Kinecta has seen an increase, but not a huge one, in borrowers pursing 15-year mortgages rather than the 30-year variety. Robinett said the majority of borrowers still are taking out 30-year, fixed-rate mortgages.
"The payment difference between a 15-year loan and a 30-year loan is significant. I tell people they can take a 30-year loan and pay at a higher amount if they want, without the requirement."
Correspondent Program
Earlier this year Kinecta rolled out a correspondent program for the mortgage business on a pilot basis. In 2012, Robinett said, it plans to go to other credit unions to help them with the mortgage-origination process. There will be different versions, including a private-label option in which Kinecta would do the work, but all the documents would be in the credit union's name.
"To the member it would appear ABC Credit Union would be doing the loan, but we would help with the process," he explained. "This is an opportunity to help credit unions that are not originating mortgages at this time or wish to originate more often. We would benefit and the other credit union would benefit."
Kinecta already has a number of subsidiaries, including Kinecta Financial & Insurance Services, Apollo Insurance Services, and Kinecta Alternative Financial Solutions, dba Nix Check Cashing.
