University of Wisconsin Credit Union has begun a three-year push to make itself a player in the local mortgage market.

"We're small potatoes now, but we're going to get bigger," said Don Percy, president of the $267 million-asset institution.

Expecting to lose one of its main businesses to the federal government's direct student lending program, the Badger State's largest credit union is looking for new ways to make money.

"We need to replace those loans," Mr. Percy said.

As of May, student loans represented $60 million of the credit union's $207 million loan portfolio. It has the largest student loan portfolio of any credit union.

Mr. Percy is going to submit the credit union's mortgage plan to its board this fall. But the first steps toward expansion have already been taken.

Earlier this year the credit union received approval to sell its mortgages to the Federal National Mortgage Association, and it will begin doing so next year.

It also stopped selling mortgages to the Credit Union National Mortgage Association, a subsidiary of the Wisconsin-based trade group.

"We wanted to retain the servicing," Mr. Percy said, and with CUNA Mortgage the credit union had to give that up.

The credit union also holds some mortgages in portfolio.

Staff Increases

In the past 18 months the credit union has beefed up its mortgage department, to six from four people.

The credit union also is cultivating relationships with local real estate agents, who could refer clients to the credit union for financing.

"We never did that before," Mr. Percy said. "We waited for business to come to us though our members."

So far credit union officers have talked with the area's largest agents, including Century 21 and First Realty. "They're reaching out beyond their members and into the community, and the easiest way to do that is through the brokers," said William Kessler, president of Century 21. "People are finding out it's easy to become a member of the credit union."

The institution's customer base includes faculty, staff, students, and alumni of the University of Wisconsin and their family members.

Mr. Kessler said the credit union has built up a good track record in mortgage lending.

The credit union now has roughly a 5% share of the local mortgage market, Mr. Percy said. He declined to say what percentage the credit union is seeking, but it's "more than we have now."

The credit union currently has $39.7 million in real estate loans. Under board policy, no more than 30% of the loans in portfolio can be in real estate. That ceiling could be raised to 40% within three years, Mr. Percy said.

The credit union's bid should make local bankers nervous, because they already view it as a tough competitor.

"They're damn good," said Robert Gorsuch, president of Park Bank in Madison. 'They're a good community bank that doesn't pay taxes."

The credit union has a deep penetration in Madison, thanks to its affiliation with the university. It has more than 80,000 Customers in a metropolitan area of 377,000.

With an auto loan portfolio totalling $82.7 million, the credit union is one of Dane County's top auto lenders.

During a recent 16-week auto promotion with about 70 auto dealers statewide, the credit union netted $30 million in loans - nearly twice the amount it had anticipated.

"They're extremely competitive in all areas of retail banking." said David Locke, president of $40 million-asset McFarland State Bank.

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