Shift From Indirect Auto To Mortgages Pays Off

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GROTON, Conn.-Tough times for the mortgage industry? Not at Charter Oak Federal Credit Union, which The Warren Group recently named Eastern Connecticut's No. 1 Mortgage Lender after experiencing tremendous growth in its mortgage business.

"For many years we focused on indirect auto loans," said CEO Brian Orenstein. In late 2009, however, he said "we saw some downturn in that industry. We had been in the mortgage business prior to that, but it wasn't our main focus. We determined that the mortgage business was a lot better place to be than the auto business and we started that transformation."

After bringing in the services of a new chief lending officer, the $653-million CU also began transitioning from outsourcing its mortgage servicing to doing the work in-house, including bringing on a new mortgage manager who instituted several new best practices and efficiency measures. The mortgage push was the institution's primary focus by the end of '09 and Orenstein said Charter Oak was already seeing it pay off by early 2010. The CU had more than $132 million in mortgage originations last year. Charter Oak has more than 70,000 members.

"We knew we could do a lot of refinance business, and we came out with a great new product that focused on people's pains," he said. "Rather than invest in 1% CDs or a volatile equity market, we felt people would rather be investing in their own homes."

The product that has generated the most business has been Charter Oak's Mortgage Accelerator program, which amortizes a loan over the course of eight to 12 years at a rate of 3.75%. Orenstein said that program was marketed in newspaper ads and over the radio, generating a flood of interest.

"A lot of it was just letting people know that credit unions actually do mortgages," he said. "There are so many credit unions that don't do mortgages, mainly because of their size, and people hear 'credit unions don't do mortgages' and they think that no one does them. We had to educate our field of membership that we were in the mortgage business."

Orenstein noted that because of the shorter amortization period there definitely have been members who are unable to afford the higher payments that come with an eight-year term, but he said that in some cases loan officers were able to put those members into 12- or 15-year terms, as well as some traditional 30-year plans. Even if members don't opt to take advantage of the eight-year mortgage, he said, "it brought the phone call to us and then we could place the member or prospective member into the right product for them."

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