WASHINGTON — Credit unions seeking to write more mortgage loansshould focus on lending more for their own portfolios, streamliningand speeding up their mortgage underwriting process and reachingout more comprehensively to Realtors.

And they should try to accomplish these changes while alsoenduring one of the most confusing regulatory environment inhistory.

Those were conclusions drawn from a workshop that placedmortgage professionals from law, data and real estate firms in thesame room as roughly 40 CU real estate executives from about 25credit unions dedicated to building and improving their mortgagelending programs.

The American Credit Union Mortgage Association sponsored andhosted the meeting, which President RobertDorsa said looked a lot like the original meetings thatestablished the association 15 years ago.

Since then, the association has grown, Dorsa said, but only aminority of credit unions offer mortgages at all and even a smallernumber have really become mortgage lenders, Dorsa said.

“We wanted to take our show on the road, so to speak, to try toboth help credit unions understand and cope with changes in theindustry as well as to help light a fire under CUs that still havenot made mortgage lending a key part of their member services,” hesaid.

Tracy Ashfield, a CU mortgage consultant who has been workingpart-time with ACUMA, said that the changes in the regulatoryenvironment were effectively making it more difficult and expensivefor a credit union to just write the occasional mortgage for itsmembers.

Previously, she pointed out, a credit union could outsource bigparts of the process to a third party, such as a CUSO. Now moreparts of the process, such as those relating to the Home MortgageDisclosure Act, cannot be outsourced because of compliance requirements.

And if a CU is going to have to comply for the current 12mortgages per year it writes, she observed, it made more sense toactually start up a mortgage lending program and become a mortgagelender.

But as almost all of the meeting's attendeeshad already started mortgage programs, much of the discussionfocused on how the mortgage market has changed since theresidential finance crisis and subsequent economic downturn.

Thomas Popik, a research director with Campbell Research andInside Mortgage Finance, presented data that described how sharplythings had changed in mortgage lending.

The first big change has been the decline in refinance lending,a longtime staple of CU mortgage operations, Popik said. And thatleft a somewhat smaller and sluggish market for purchase moneyloans. The market for these loans had been propped up by a federaltax credit for new home purchases, Popik said, but then slowedsteadily after the tax credit expired. It had also been hurt bysheer numbers of economically distressed properties that had comeflooding into the market, he said.

This large bulge of economically distressed properties forceddown prices and, perversely, often generated problems as theobjects of mortgage loans, he explained.

The large percentage of distressed properties in the market hasoffered specific challenges to credit unions, Popik explained. Onshort sales, for example, once mortgage servicers consent to takinga short sale, they often require that the financing for the sale bearranged and closed within 30 days, a requirement that often meansdeals fail to consummate.

Additionally challenging is the percentage of distressedproperties that are sold without any mortgage at all, eitherbecause the purchasers, which are usually investors, choose to usecash or because the damaged REO is so impaired that it could notanchor a mortgage loan.

But where distressed properties put obstacles, they also provideopportunities, Popik said.

Credit unions that control their underwriting and can meet the30-day limit on short-sale financing, for example, could find astrong market for their services, as could credit unions that reachout to investors seeking to purchase REO.

“If credit unions could shorten those times because they controlthe underwriting process and time lines, they could obtain asignificant market advantage in the REO market,” Popik told thegroup.

Credit unions being able to control their mortgage underwritingled to a discussion of the growing desirability of writing mortgageloans for their own portfolios and not to necessarily sell on thesecondary market.

As long as a credit union kept track of its balance sheet issuesand worked to mitigate any interest rate risk, portfolio mortgagelending allows credit unions to offer their members more customizedand individualized mortgage loans as, in general, mortgage lendingis becoming more standardized and commoditized.

Terri Murphy, president of Terri MurphyCommunications and a Realtor, led the workshop through exercisesdesigned to help participants understand the different ways theirmortgage programs needed to change in order to be ready for thedifferent types of members they will need to serve.

Examples included ways to use social media to provide greatertransparency about both the mortgage product itself and themortgage underwriting process.

She also discussed credit unions' need to make not only theirmembers aware that they offer mortgage loans, but Realtors as well,as they play a key role in deciding where a home purchaser willturn for mortgage financing.

There is evidence that homebuyers will go with the mortgagefinance firm that their Realtor recommends, Murphy said,acknowledging that even in the age of the Internet, Realtors stillhave a role to play in the real estate purchasing process.

“No one can know a locality like someone really there,” Murphysaid. “A screen can show you what a house looks like and what ithas in the way of amenities, but a screen is not going to know thatthe school two blocks over lets out at three and when it does theentire neighborhood traffic locks up,” she added.