LAS VEGAS -
"We could go all-in and double up really quick," Bob Dorsa told the Credit Union Journal during ACUMA's recent conference here. "The value of all real estate loans in the U.S. is $7 trillion, and credit unions hold just 2%, or $140 billion. If we double up to 4%, we could get the credit union system to exceed $1 trillion in total assets."
The opportunity "appears to exist," Dorsa continued, but to take advantage of it CUs must build the infrastructure required to fund and service a large number of new mortgage loans. In addition, he acknowledged, the regulatory oversight necessary for so much new business is a "big issue."
"The marketing viewpoint is: we have to do this. But I'm sure regulators would have heart failure at the idea of picking up $200 billion in mortgages," he said. "But we have to. This is the most opportune time since Edward Filene was walking around."
One day prior to ACUMA's conference, the Federal Reserve cut the Federal Funds rate by 50 basis points, sparking a massive rally in the financial markets. Unlike many on Wall Street, however, Dorsa was underwhelmed by the importance of the cut-especially its potential impact on the mortgage market.
Easing The Pain
"It will ease the pain, it will quell the doom and gloom, but now what?" he asked. "Will people expect rates to keep going down? Will they wait until next year to refi? Those with an interest rate tied to the index will feel better, as will others with variable payments, which might not go up as much."
While Dorsa said does not know Fed Chairman Ben Bernanke well, he believes Bernanke and the rest of the Fed "had to do something" to calm down the markets, as many in the media were demanding a rate cut. However, Dorsa said he hesitated to say the Fed was "pressured" to cut short-term rates.
"Ben Bernanke is a professor of economics and has a very impressive resume, but the key is: what does the average consumer or homeowner think? Can someone who couldn't buy a home last week now buy one? Only time will tell if it is a saving grace or a Band-aid. "Next week will 1,000 more credit unions get into mortgages because there was a rate cut, probably not," he added.
Dorsa said he hopes the rate cut will help save consumers with so-called "broken ARMs" from losing their homes due to payments resetting beyond their means. Credit unions will be affected indirectly, he explained, because most have not made "bad loans," such as no-documentation, stated-income, 100% loan-to-value mortgages to people with shaky credit.
The Concern: The Affect On Delinquencies
"Members don't have these loans with credit unions, but they do with banks and other sources. The concern is: will that affect credit union delinquencies? Will consumers keep paying on their home loans and let other loans slide?"
Asked if CUs should mount a unified, national campaign to inform the public they are an underused source for mortgages, Dorsa replied, "For years I've been a committee of one trying to get Denzel Washington to talk about credit unions. Not a PSA, but Denzel talking on the news every night. "We need to look at this like a football team striving for the Super Bowl," he continued. "These are the stakes in my mind, but many credit union people don't look at it that way."
According to Dorsa, ACUMA has no vested interest in the credit union mortgage market ("We don't sell anything or promote politics-but we try to influence," he said). Instead, it exists to offer a venue for discussion. Not offering mortgage or other real estate loans is a negative, Dorsa argued. He labeled the 5,000 CUs that don't participate in real estate lending "a drag on the system."
"I would like to see a campaign that paraphrases Nancy Reagan: 'Don't Say No' to a member who wants a mortgage, because they'll go to a bank. Many members who are in dire straits today would not have been if a credit union had said yes. Instead, their credit unions said 'no,' so they picked up the Yellow Pages to find a mortgage lender and ended up with a charlatan."
CUs pride themselves on being the "good guys" in the financial world, so they should not "sit around and wait for someone else to come to the rescue," Dorsa insisted. "Credit unions could be the lender of choice and put people in loans that won't hurt them, but there's too much apathy," he declared. "If nothing else, don't hold back the credit unions who want to help. We need action, not words. We have to find how to take it to another level, like a sports star."
Dorsa has long said CUs should strive to hold 10% of the mortgage loan market. As for the immediate future, "Before we get to 10%, we have to get to 3% first. Then, we can go where no credit union has gone before: 4%.
"There are too many mortgage conferences and not enough results," he added.
