More than 50 credit unions were part of a Fannie Mae study on mortgages that revealed not only the face of the top credit union mortgage originators but also some lessons to be learned from the 2005 mortgage market.
Fannie's recently published "Mortgage Origination Benchmarking Study, Mortgage Focus" surveyed a third of the top US lenders by volume-128 institutions participated, of which 52 were credit unions.
Of those 52, 61% were community charter, 39% SEG or multi-SEG, 46% had more than $1 billion in assets, 22% were between $500 million and $1 billion and 33% were under $500 million, 46% were federal charter, 54% were state. The average loan size was $130, 761 and average loan volume generated was $181,193,713.
Not surprisingly, technology is increasingly making a bigger contribution, as the Internet/Call Center Channel proved to be the most profitable, with CUs earning 24 basis points per loan versus 10 bps for retail lenders and 10 bps for wholesale lenders.
That channel generated the highest percentage of conforming and refinance loans. "We found that the Net and Call Center channel kept up volume with refinancing and people are still using it," said Brian Cusick, Fannie Mae's senior manager of single-family mortgage business.
"Use of the Net doubled the number of loans closed," said Cusick. In a declining market, using technology cuts costs and boosts profitability by streamlining the origination process and allowing staff to focus on service.
CUs relied more on refis, but there is a continuing shift of the loan mix and a decided shift to a sales-oriented culture, and outsourcing.
"Some 33% used outsourcing, all of it on-shore, and mostly for closings," said Cusick. "I suspect that has to do with the complexity of it."
There were fewer refis, however, down from a high of 69% in 2003 to 39% in this year's study and more seconds and HELOCs, which climbed to 40%. HELOCS and seconds represented more than half of loan volume for 60% of CUs in the study, but net production for them was under 4 bps.
Growing use of incentives in credit unions is marked from the year before, said Cusick. It's simply a good tactic to retain and motivate employees, he said, and incentive payments per closed loan have doubled from a year ago.
The average payment in 2004 was $73 and in 2005 was $159. "I've even heard of some credit unions going to commission-only, which in the past was just unheard of in credit unions."
Overall concerns of the CUs in the study, unsurprisingly, were rising interest rates, more competition and broadening the consumer mindset away from thinking of CUs as mere providers of consumer loans to include mortgage financing.
Finding ways to address the lack of affordable housing was also cited. Finally, finding ways to build relationships with builders and real estate agents was mentioned.
