Seventh Inning Stretch, Two Minute Warning, Final Time Out for Mortgages!
This time of year, three of our favorite sports converge: the World Series of baseball, the NFL football season and the start of NBA basketball. As baseball winds down, football kicks in and B-ball is poised to start the clock. Thus, the terms in my column headline all refer to the nearing of the end of the game in those respective games.
I use this sports metaphor because in each case the teams use the time to tap their reserve of strength and energy to win the game. Similarly, I believe the credit union industry must do the same when it comes to real estate mortgage lending.
Looking at 2007, many homeowners are facing the hard truth that their ARM mortgage payments may be increasing several hundred dollars each month as rates adjust skyward. Consumers who locked in rates in the 4% to 5% range are finding their rates may rise as much as 50%. Other borrowers may have waited to convert their negative amortizing mortgage loans to ones that better fit their budget for the longer term. Baby boomers may need to take reverse mortgages to see them through retirement. In all cases, there appears to be great opportunity to address member needs as well as the focus on first-time home buyers and the reality that people still relocate for one reason or another, or simply move up or down in property type as their lifestyle changes.
Unfortunately, too many credit unions ignore these opportunities. Whether this is attributed to inconsistent lending policies or simply a failure to recognize these opportunities, it doesn't matter. We need to dig in and gear up for the last stretch of the game. Victory means capturing a much greater share of the mortgage lending market.
Regardless of any forecast for interest rate increases or the changing consumer appetite for new or "exotic" mortgage loan products, the credit union community must develop a recognized reputation as viable mortgage lenders. The competition hasn't decreased its marketing and advertising, so we have to increase our efforts just to keep pace. The simple truth is that too many consumers do not know about credit unions. We don't have a national footprint, brand identity or image. Until all credit unions realize it is up to each and every credit union to contribute to the entire system, this won't change.
I think it's the duty of each and every credit union to make mortgage lending a core product. Not just for better member service and retention, but for the preservation of the credit union system. Credit unions that ignore this "must have" lending area or believe a passive referral will do are myopic in their future vision. Where else in the credit union's suite of services can they find a product that creates such increased revenue, cross-selling penetration and earned member loyalty? I challenge our distinguished credit union leaders to think more about the consequences of letting this business slip through their fingers. How can they ignore assisting first-time homebuyers at a time when credit union membership is declining? I say declining, because credit union membership growth in the past few years has been flat. Consider the real impact of indirect lending programs. Members are derived through the commoditization of credit paper passing from outside sources to the credit union and in many cases that is the only relationship these borrowers will have with the credit union. Long gone are the days when the vast majority of members are joining because they perceive a competitive advantage in doing business with a credit union!
How did it come to this? In a few years we will celebrate 100 years of credit union activity in America. I encourage CU management and volunteers to see this anniversary as the 7th inning stretch, the two-minute warning and the final time out. If we do not change our way of thinking and acting, our future as an industry would seem to be very uncertain.
Who bears the responsibility for initiating these changes? Each credit union should seriously answer this question as honestly as possible! In my 30-plus year career in the credit union system I strongly feel many credit union volunteers are out of touch with the important issues facing credit unions. I know many do not even obtain their mortgage at their credit union for one reason or another. Based on age I also wonder how many volunteers even have a mortgage loan at all. Almost 30% of the nation's homeowners have no mortgage according to the National Association of Realtors(R). I feel much more accountability from the CU management and boards is strongly needed in this area. I would suggest a measurement tied to a solid increase in real estate lending be implemented to accurately hold both groups accountable!
I have also heard from people quick to place blame on NCUA for our lackluster performance in real estate lending. Somehow they suggest the agency is anti-real estate lending. I believe NCUA is focused on ensuring safety and soundness as well as appropriate due diligence in real estate lending policies. I have observed that where the appropriate measures in underwriting are deployed, NCUA is comfortable with real estate lending overall. I suspect some readers will stop here and say, who is this irreverent so-and-so to attack our philosophy and history like this? My response is simply, I am not at all satisfied with our position in the marketplace and if left uncorrected will cause problems for the CU system in the future. I've seen our real estate penetration rate remain the same (2% of all homeowners on average) for the past several decades. In fact, I'm not sure we have ever exceeded 2%. This is one fact that should no longer be acceptable by anyone in our business!
I challenge every credit union CEO and their board to contribute something to drastically changing this abysmal condition. Unless we step forward and communicate to the consumers of this country that we are ready, willing and able to help them with securing financing their "American Dream" the most important financial decisions every family faces, the final whistle will blow and the game will be over. So, are we ready to turn out the lights? Or are we going to pull off a comeback fit for the history books?