Downturn Expands Bethpage’s Mortgage Portfolio
If there is a credit union determined to not let a crisis go to waste, it is the $4.2 billion Bethpage Federal Credit Union.
From its headquarters in Bethpage, N.Y., situated in Long Island's Nassau County, the credit union booked more than $1 billion in mortgage loans in both 2009 and 2010 and is on track to do the same in 2011, according to Michele Dean, senior vice president for lending and investment services.
As of the end of June, the credit union had built roughly $532 million in mortgage loans, a high percentage of which were the coveted purchase money loans, Dean said. These are made to borrowers who are purchasing a property for the first time rather than through a previously refinanced loan.
“We are definitely on track to crack more than a billion this year too,” Dean said, adding that the numbers this year are similar to those of previous years.
This accomplishment becomes more notable when you consider that the overall housing downturn and economic slowdown was taking place over roughly the same time. Dean explained that rather than treating that uncertain period as a reason to slow up and retrench from its mortgage program, Bethpage saw it as a good time to try to build on it.
“We already had the foundation of a mortgage and housing finance program, but one that was focused more on home equity lending and refinances,” Dean said. “The refinance is not surprising because we were like a lot of others, a refinance shop primarily. Our difference is that we wanted to move on from there and expand the mortgage business.”
Like many other credit unions, Dean explained that Bethpage had figured out it needed to grow the percentage of its mortgages that did not merely refinance an existing mortgage loan even if that meant bringing a loan from another lender to the credit union.
Refinancing mortgages can drive loan volume for a time but Dean said everyone knows it’s a set pool of business. At some point, the number of available loans to refinance dries up. When that happened, Bethpage knew it would need to have a stronger program to attract people who were taking out loans to actually purchase property rather than just refinance existing loans, she pointed out.
Purchase money was also important because it served as a way of introducing more Long Island residents to the credit union and building up Bethpage’s membership as well, Dean said.
To make the transition to becoming more of a purchase money lender, the credit union turned to Realtors after data showed that real estate professionals played a key role in the decision of which lender captured the mortgage of a given sale.
At first, much of the outreach had centered on educating Realtors about the mortgage opportunities that Bethpage represented. That soon moved to providing active support for Realtors such as creating credit union space for them to use for continuing education classes and actually situating mortgage loan officers in Realty offices.
“This is still a pilot program for us,” Dean said. “The idea is to put a loan officer in the midst of Realtors where they can be around to ask questions and pick up business,” she said.
Prior to the effort to book more purchase money loans, the credit union had tended to market its mortgages in a more passive way – promoting them as just one of the different loans the credit union offered and waiting for members to approach. After the shift, Bethpage began to emphasize housing finance and hired mortgage loan officers to work outside the credit union, among the community and with Realtors.
“This was at a the time when all of the housing finance industry was going through the crisis and there were a lot of experienced loan originators either being let go or seeing their firms collapse,” Dean said. “So we looked around and saw there was all this talent available and decided to try to take advantage of it.”
The loan officers who work outside the credit union – Dean referred to them as the outside loan officers – are paid a salary and commissions like the loan officers who work inside Bethpage. They had a supervisor as well but they didn't stay in any one credit union branch or office.
An additional benefit of booking more purchase loans has been the ability to manage them for the credit union’s own asset and liability management needs, Dean said. While Bethpage’s 30-year, fixed rate mortgages remain popular with many members, the credit union sells all of them though it retains the servicing, she added.
Bethpage keeps its adjustable-rate and shorter-term mortgages on its books. For a while, the credit union provided a bonus incentive for these types of loans but ended that program when new regulations prohibited using incentives to favor any specific types of loans.
Overall, Dean said the mortgage program has become a significant engine for the credit union in the different communities it serves, both to build and drive its brand. The program has also helped build membership and added more products per member.
Dean encouraged other credit unions to position their programs appropriately to see similar results.