REOs Grow at Nation’s Credit Unions
Contrary to conventional wisdom, as the nation moves through an extended housing downturn, a number of credit unions have found themselves faced with significant amounts of REO.
REO represents real property the credit union has taken over after members lost the ability to pay make their mortgage payments or, in a smaller number of cases, walked away from their mortgage notes.
The credit union turned to Green River Capital for the degree of its expertise in managing REO for financial institutions as well as the relative ease of use the firm had for management, according to the credit union. Mountain America grew impressed enough both with the scope of both its own REO portfolio and the REO being reported by other credit unions that it decided to begin offering Green River's services to other credit unions through its wholly owned CUSO, Mountain America Financial Services.
Rather than turn to an outside firm, the $23 billion, 1.7 million member State Employees' Credit Union in Raleigh, North Carolina decided to re-organize its REO operation after the amounts of real estate it held began to rise. According to its reports to NCUA, the credit union had 319 properties on its books worth roughly $33.5 million as of the end of March.
“This is where it can get tricky,” Coburn said, “balancing the appraisal, with the Realtor's opinion and what the branch officer knows about the area. Sometimes we decide to ask the appraisal price plus a 10% or 15% premium, sometimes we ask the appraisal price alone and sometimes we have to keep it off the market to make some significant changes or repairs to it,” he explained.
If a property has not moved in 60 days, he said, if there have not been any showings of it or if there have not been any offers, the CU evaluates it again and, if it decides the price has been too high, cuts it and re-lists it or, in some cases, changes the Realtor its using.