Credit unions absolutely can and should make mortgage loans, according to a longtime CU executive, but in order to do so they need to get serious about the product.
Mark Willer, chief operations officer with the $1 billion Royal Credit Union headquartered in Eau Claire, Wis., explained that Royal has been offering mortgage loans for the last 30 years but "seriously" only for the last 15.
"Prior to 15 years ago, we would offer mortgages but really we were just dabbling in them," Willer said. "We would offer mortgages for our best members, but we really didn't market them or take on a professional air about them or really reach out to Realtors to try to attract purchase money. Our attitude was that if an employee could help a member open a checking account or take out a car loan, they could also serve as a mortgage officer and that just wasn't working."
Royal began to change its approach to mortgage lending when it gradually realized how many of its members needed good quality mortgage loans and became passionate about filling that niche in its market. Willer recalled the first steps as somewhat painful, recounting how the credit union early on invited several noted Realtors to lunch-including some who didn't have high opinions of Royal's mortgage efforts-and listened to what they had to say.
"That was key because listening to the Realtors both gave us a better idea of what we needed to do to step up our mortgage operation [and] also let us make a solid commitment to them that we were in this market, seriously, to stay," Willard said. "We had the chance to let them know we are serious about making our mortgage operation more professional."
Royal's next step toward mortgage lending sophistication was to seek out and hire experts: first, the mortgage originators who help borrowers choose appropriate loans and then guide them through the mortgage lending process and, second, the underwriters and other professionals who support them.
"We wanted to be able to say to the highest level originators that we're committed to creating a mortgage operation that will help them be successful," Willer said. "And by and large we did that."
The commitment has paid off for the credit union. Royal has a community charter that covers two Wisconsin counties, the larger Eau Claire County and smaller Chippewa County. Together the two counties have a population of about 161,000 people, according to the U.S. Census, and Royal Credit Union is the dominant mortgage lender in each county, with a mortgage market share at least 15% higher than its nearest competitors, both banks.
All told, Royal services more than $1 billion in mortgage loans, both from its own books and for Freddie Mac, where the credit union is considered a tier one servicer. That gives Royal an additional income stream from the loans as well as a key position with the members who are mortgage borrowers.
An analysis of Royal's membership, Willer explained, showed that its mortgage borrowers had five of the credit union's products, while those without mortgages had only two to three on average. "Mortgages are definitely one of our core products," he said. "They are important to us and to our membership both now and into the future."
Willer, who serves on the board of the American Credit Union Mortgage Association, contended that mortgages can and should be core products for most credit unions. The credit union industry has an increasing percentage of members who distrust banks, are confused about financial services and products and need their credit unions to step up, Willer said. And one of the most important places they can do that is in mortgage lending.
"Even smaller or mid-sized credit unions, through a relationship with a CUSO, can get started on a significant mortgage program that can help [them] better serve members," he said. "Now is the time to get it going."