SECU Reports One Of Lowest Mortgage Delinquencies In U.S.

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State Employees Credit Union here last year had one of the lowest mortgage delinquency rates in the country.

SECU was the only credit union that cracked the top 20 lowest overdues for lenders in the country, according to statistics compiled by The Credit Union Journal affiliate Mortgagestats.com.

Its rate of 1.8% delinquencies on 46,059 loans serviced ranked it 10th in the country in 2001. That's less than half the average national rate, which is currently 4.65%, according to the Mortgage Bankers Association of America.

The numbers get better farther out, according to Mortgagestats.com (delinquencies refer to 30 days or more overdue). At 90 days overdue, just 20 basis points of State Employees' portfolio was delinquent as of Dec. 31, and foreclosures for the year were a miniscule one basis point.

The Factors In Success

Phillip Greer, senior vice president of loan administration for the 145-branch credit union, attributed its performance to "great management." And despite ranking in the top 10 in the country, he thinks the credit union's delinquencies are higher than they should be. "Our delinquencies have historically been well below the national averages," he said.

Automatic payments are a big help in keeping loans current, he said, noting many members have automatic payroll deductions for their mortgage amounts. And a full third of its borrowers have an automatic deduction made from their checking or savings accounts.

Handling overdues on the branch level, rather than from headquarters, is another key ingredient, according to Greer. Branch managers familiar with the circumstances of the overdue member work out payment schedules to get them current, he said.

Another good preventive measure comes at the beginning of the process. "We like to think we do a good job underwriting the loan," Greer said of the $8.2-billion State Employees, which has been making mortgages since the 1950s.

Greer said the credit union's FOM of teachers and state government workers weathered last year's recession fairly well, although there were some jobs lost in state government.

Last year, SECU more than doubled total originations, its portfolio grew by $700 million, and its first mortgages nearly tripled. The credit union, which is the second-largest natural-person CU in the U.S., held more than $4-billion in first mortgages at year-end 2001, up from $3.3-billion the year before, remaining the largest credit union holder of mortgages. Charge-offs of first mortgages were $686,000, but the credit union recovered $227,000 for net charge-offs of just $460,000. SECU, an adjustable-rate lender, originated $1.7-billion in first mortgages last year, and about $80 million in seconds. That compares with a total of $714 million in 2000, with $605 million of that in firsts.

For the past 15 years, SECU has been able to keep costs down on many mortgages by offering them to its members without mortgage insurance when it feels this is appropriate.

It has been able to do that on loans with a higher than 80% loan-to-value ratio (where the borrower puts less than 20% down) because it keeps the vast majority of its loans in its own portfolio.

Secondary market outlets like Freddie Mac and Fannie Mae require the borrower to buy mortgage insurance on any loan with an LTV greater than 80%.

In other mortgage news at SECU, it has introduced a loan modification program, meaning its 900,000 members will not have to re-originate a mortgage when they refinance.

Instead, for a total cost of 75 basis points, they will be able to modify the terms of their existing note, eliminating fees for appraisals, lawyers, and doc prep costs.

While State Employees has the largest mortgage portfolio, Navy Federal Credit Union of Merrifield, Va. remains the largest producer of mortgages in the CU field. Predominantly a fixed-rate lender, Navy sells off much of its volume in the secondary market, with servicing volumes that usually put it in the top 100 of the industry.

Mortgage Volume Doubles

Last year, Navy produced a stunning $4-billion in mortgages, including both firsts and seconds, while holding a $3.33 billion portfolio. Its 2001 volume was double its 2000 production of $1.9-billion.

Last year, the overall mortgage market also doubled, from $1 trillion to $2 trillion, according to Mortgagestats.com, so the performance of the top two credit unions was in line with the overall trend.

Navy's volume ranked it 63rd in the country last year, according to Mortgagestats.com, while SECU was 80th. CUNA Mutual Mortgage, Madison, Wis., came in 76th at $1.86 billion.

According to the National Credit Union Administration, real estate lending (firsts and seconds) in the industry rose to 41% in 2001, from 39% the year before.

In recent years, mortgage and home equity lending has overhauled new and used auto lending as the top asset in credit union portfolios.

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