Alaska USA Title Agency Helps Shield Against Lower 48's Housing Crash
The 800-mile pipeline was a major infrastructure designed to move oil from the North Slope of Alaska to Valdez, the northernmost ice-free port in North America, according to the Alyeska Pipeline Service Co., which led the effort. Started in 1975, when construction wrapped two years later, the pipeline snaked across three mountain ranges and more than 800 rivers and streams. To date, more than 15 billion barrels of oil have moved through the system.
Nancy Bear Usera, senior vice president of corporate development at Alaska USA Federal Credit Union, remembered how the pipeline's completion led to job losses and real estate ruts throughout Alaska.
"When the Trans-Alaska pipeline construction project ended, there was a dramatic recession, which in many ways mirrors what is going on in the lower 48 now with respect to housing," Usera said. "I remember the stories of people walking in and leaving their keys on desks, similar stories to what you hear today."
The pipeline lessons have provided a model for how and when to move forward including with new subsidiaries. Nearly seven months ago, the $4 billion Alaska USA FCU launched Alaska USA Title Agency, one of four wholly owned CUSOs. Since then, it has received more than 500 orders, but it's not yet breaking even, Users said. The CUSO is on track to turn a profit by the second quarter, she added.
"As with any start-up, business is building incrementally. Most new accounts are generated through internal referrals from Alaska USA Mortgage Co., but as the reputation and visibility of Alaska USA Title Agency grows, so will the client base."
The title agency was a natural progression from Alaska USA Mortgage, which has been around for 30 years. Usera said the company is now among the top three mortgage lenders in Alaska, servicing more than 18,000 loans representing nearly $3 billion. The majority of the mortgages made are not held in the credit union's portfolio but are sold in the secondary market based on investor guidelines, she noted. The company generally maintains the servicing rights. Approximately 1,700 home equity, recreational and adjustable-rate and other loans are held in portfolio and represent nearly $600 million.
The synergy and interdependencies of the two distinct yet related functions were obvious, Usera explained. Alaska USA was originating hundreds of loans, and then sending members elsewhere for title and closing services. The answer was to charter its own agency to capitalize on referrals from its mortgage company as well as to attract business from other segments of the market.
"Because title agencies are subject to a complex set of rules and regulations and are supervised through the Alaska State Department of Insurance, the chartering process took dedication of resources and a real commitment to the business enterprise," Usera said. "It is not something to be undertaken lightly."
Title work is similar to mortgage loan origination in that it is dependent upon a strong, respected brand, plus the relationships that develop over time that generate referrals, Usera said. An advantage was Alaska USA's "strong brand." That also helped to attract seasoned professionals with existing relationships. The CUSO now has 12 title professionals, led by General Manager Crystal Peltola, a 20-year veteran in the business.
Alaska USA Title also has a team of escrow managers, escrow officers, title officers and assistants.
What may work in the title agency's favor this year is that Alaska is not in the throes of a housing crash like the one clogging markets in the lower 48, Usera said. The state also didn't have "huge value appreciation; just steady growth year after year." She acknowledged that Alaska's market has softened a bit, in some communities more than others, but prices have held fairly steady. Foreclosures across the state have gone up slightly each year and as a result, the credit union has had to make adjustments in its loan policies to protect the performance of our portfolio. Still, low mortgage rates have helped to boost refinancing, Usera said.
"We have direct experience with real estate market crashes and have learned many lessons that apply today. We are much smarter today as a result, which is why we sell most mortgage loans on the secondary market," Usera said. "We only portfolio those loans where we can manage the interest rate and collateral risk. We also learned to respond to market conditions ahead of the curve and not wait until bad stuff happens before adjusting underwriting and origination standards."