Investment In Mortgage Production Pays Off At One CU
DOWNEY, Calif. — Financial Partners CU made a strategic decision four years ago to write more mortgages, and in 2010 the payoff for the $724-million credit union was significant.
CEO Nader Moghaddam told Credit Union Journal that up until about four years ago Financial Partners CU was a portfolio lender on mortgages, and not in the business of generating loans beyond its immediate needs. But he noted the management team came to realize that when the portfolio reaches a point where it cannot take on more first mortgages, it means an inability to meet member needs.
"We wanted to be able to be in the mortgage business for all seasons, from a member service perspective," he recalled.
In 2010, Financial Partners CU originated approximately $266 million in mortgage volume, and sold about 83% of those in the secondary market. Moghaddam said mortgages contributed $3.5 million on a net basis to the credit union's bottom line without creating much interest rate risk, as the loans are not being carried on its books.
"We are very pleased, and as we move forward the challenges are interesting," he said. "Credit unions have done a good job in the refi market, and last year was very much a refi market, but now rates are climbing up. There is a lot of available housing stock out there and I think it will become a purchase market going forward. We need to build relationships with Realtors and get engaged with members, because it is a transaction environment."
According to Moghaddam, CUs need to be in the mortgage market during all rate cycles and during all market conditions. He believes the housing market is "settling down," and credit unions "need to get on board and take advantage of that."
"There are third parties out there that can help credit unions help their members, so they don't need to establish their own mortgage lending department," he said. "They still need to have training and an understanding of the business, but they don't have to build a department if they don't have the scale."
Housing Bouncing Up
In a number of markets in this hard-hit state, Moghaddam said, it is clear housing already has hit the bottom and is starting to come up. There is no mystery: it is related to employment, he assessed.
"Unemployment also has hit the bottom and we are seeing signs of recovery. Once employment picks up that will lead to more confidence and that will mean more purchase mortgages-and more auto loans, by the way. I think things will open up nicely as we move through 2011 and into 2012."
The market during the next two years will not be like the "go-go years" of 2005-06, he predicted, adding, "but we are on the mend." It will be a slow mend, but there are opportunities to be had, Moghaddam insisted. From preliminary numbers, Financial Partners CU had one of its best years ever in 2010, but that was after three "terrible" years, Moghaddam noted.
"Our theme this year is 'steady as she goes.' No fireworks, but steady improvement," he said. "There are a lot of headwinds, including interchange and other things, but we can figure it out. What's ahead of us are solvable issues."