- Different credit union mortgage lenders share parts of what has helped them succeed.
- Credit unions discussed “housing czars”, reaching out to Realtors and tailoring loans to member needs.
- Experts also discussed strategies to help mitigate “strategic default.”
LAS VEGAS — At its 15th anniversary conference this year, the American Credit Union Mortgage Association used morning sessions to address big ideas and mortgage issues left for the balance of each day for credit unions to share best practices and tips to improve their mortgage operations.
In one session, executives with two credit unions that are very experienced mortgage lenders urged other credit unions to appoint “housing czars” in their CUs to help them build their mortgage business.
Mark Wilburn, chief lending officer for 66 FCU in Bartlesville, Okla., acknowledged before a breakout session that they chose the term housing czar because it was catchy, but he emphasized the importance of having a business development officer who knew and believed in the CU and its mission as a mortgage lender in the community
The idea for a mortgage business lending officer came from a white paper first.
He described a position which he said was a mix of cheerleader, visionary and manager and which requires someone who almost takes on the position as an avocation and not just a job.
“The goal is to have someone who passionately believes their credit union must play a role in housing finance. Understanding their communities, local housing dynamics and member needs are an avocation, not merely a job,” Wilburn said, quoting from the white paper. “They believe it, they are passionate about the topic and, just as importantly, they get their credit unions to commit to housing finance as a core strategy.”
Wilburn said the decision to use the term ”housing finance” and not “mortgage lending” was intentional, an effort to elevate to the traditional core CU products of savings accounts, checking accounts and auto loans.
Kathie Spurling, real estate manager at Ent FCU in Colorado Springs agreed with Wilburn and discussed how important their business development staff has been keeping the CU in the midst of the community where it makes most of its mortgage loans.
The Colorado CU has more than 40% of its purchase money loans insured from government programs from the Federal Housing Administration or Veterans Administration.
“But that's not surprising for us as we have four military bases in our field of membership,” she said.
She also described the wide variety of approaches the CU uses to build relationships with Realtors to both educate them about how the CU can help them close loans and to help explain to members the ins and out of the real estate process.
Credit unions that have staked out different approaches to mortgage lending and developed products to meet those niches made up another panel.
Donna Hall, vice president of lending for DATCU, a 62,000-member CU headquartered in Denton, Texas described the success her credit union has had using relationships with investors to purchase the CU's loans while retaining the servicing. U
sing relationships with investors can help credit unions have more options than just Fannie and Freddie for selling loans, but she advised CUs to take care that their investors do not turn around and sell loans to their big bank competitors.
Chris Salata, assistant vice president of United Nations FCU’s mortgage center, described how many unique situations the CU faces with its heavily international membership seeking mortgages.
Almost all of the CUs members make good wages, but many lack a lot of the traditional tags for mortgage lending, Salata said. They often don't have social security numbers or FICO scores, he said, and that means the CU has to be flexible in its mortgage lending and tends to lend more for its own portfolio than for a secondary market.
“We are a portfolio lender at heart,” he said.
He stressed how important it can be that a CU tailor its products to its members.
For example, because the members tend to be very transient as part of their UN work, the CU has developed a range of adjustable rate mortgages that reflect the average seven years that the CUs members will remain in one place.
What can happen when the borrowing relationship ends badly was the topic of another breakout when an executive with Genworth Financial, a noted mortgage insurer, helped lay out the growing problem of strategic defaults on mortgage loans.
Strategic default is generally defined as what happens when a borrower can afford to pay a mortgage obligation but chooses not to, generally because they believe their property may never recover the value of their mortgage loan.
Buz Merts, director of industry relations for Genworth Financial, told credit union mortgage executives that members who have been among their most financially strong may be among the most at risk of walking away from their mortgage. Almost counter-intuitively, Merts reported that statistics had shown that borrowers with strong credit scores, multiple homes and mortgages, are up on all their other bills and have a relatively strong income are most at risk for walking away from a mortgage obligation.
“A number of credit bureaus and other financial firms have tools now that should help you analyze a portfolio and determine which borrowers might be most at risk in time to take action,” he said.
He noted that one sign of strategic defaulting loans is that a loan goes from initial delinquency to six months in one shot. A member who is genuinely trying to pay the loan might be delinquent one month then up to date and then delinquent again.
As suggestions of what to do, Merts urged CUs to move to foreclosure quickly to get the members attention and make sure the member understands the negative ramifications of that decision before they go to final foreclosure and might offer a deed in lieu of foreclosure or a short sale, which would cost the CU less money, than a default.