For what may be the first time ever, a credit union has become the biggest source of housing finance for a major metropolitan area in the U.S.
According to data collected by the Federal Financial Institutions Examination Council, more home purchasers in the Madison, Wis., area chose the UW Credit Union to finance their home loans than any other lender in 2010.
The FFIEC collects home mortgage data and published a report on the 2010 data in September. The Madison statistical area includes the Dane, Sauk and Iowa counties and includes over 500,000 residents. The report indicated the credit union had lent $83 million in money to fund new real estate loans in 2010.
“This is the first time the federally published data has reported a credit union in top position for home purchase financing in the Madison metropolitan statistical area,” said Paul Kundert, CEO of UW Credit Union. “Although home purchase volumes have been trending down, our home purchase mortgage lending market share has been on the rise and has more than doubled since 2005.”
“Our members and the community know that they can turn to us for fair treatment in financing a home purchase. People at all levels of financial capacity aspire to own their own home, and we’re here to help for the long term,” continued Kundert.
Many credit unions crave purchase money lending more than mortgage refinancing since purchase money loans tend to bring more members and offer greater stability over the long haul. Mortgage refinance business, by contrast, tends to rise and fall with interest rates and other factors.
Kundert said the credit union was working to become the leading mortgage lender for about five years, and he gave credit to Julio Rios, director of mortgage lending, for much of the progress. Rios arrived at the CU from a previous housing finance position and brought with him a vision for what the credit union's housing finance program could accomplish, Kundert explained. His experience and vision had helped guide the credit union forward, he added.
Kundert explained that UW developed its housing finance operation in five distinct ways to become the market leader. These included outreach to Realtors, moving purchase money loans to the front of the mortgage application queue, stepping up its participation in government-insured loan programs, such as those offered by the Federal Housing Administration and the Veterans Administration, educating and prequalifying members for mortgage loans and, finally, changing the way it compensates its loan originators to discourage any bias for making one loan over another.
Kundert called reaching out to Realtors a critical step because they have so much influence of the housing finance decision.
“Someone might say, 'I want to use my credit union for the mortgage loan,'” Kundert said, “but then the Realtor might say something like, 'Oh really, I have issues with them,' or 'I don't think they do many mortgage loans' and you have lost the application. Getting Realtors on board with what you do and letting them know you understand their concerns and their priorities,” he said.
He said the second step, moving purchase money loans to the front of the processing queue, was part of the Realtor outreach as well as a way of setting important customer service benchmark. Unlike refinances where there is no seller, purchase money loans often have to meet hard deadlines and usually result in the Realtor getting paid or not, so a commitment to process them first helped both Realtors and members, Kundert explained.
Stepping up the CU's participation in FHA and VA lending was also important, according to Kundert, both because having a full range of tools available helped make the housing finance program comprehensive and because it positioned the credit union for the expansion in VA and FHA lending that came with the economic downturn.
Educating members about the housing finance process and how to prepare for it, as well as prequalifying them, Kundert said, gave the CU a steady pool of members who are both linked to the CU and who are ready to make a home buying decision, even if most of them don't make one in any given year.
“We prepare and prequalify many more members every year than actually fill out applications,” Kundert said, “but we find it helps us keep up the pace on our lending.”
The reason UW stopped paying its loan originators to favor certain kinds of loans was to make everyone understand that the CU viewed all loans as important and considered it role was to make sure the members got the best loans possible.
“There was another scandal here a few months ago where a mortgage company had originator steering consumers to one kind of loan because it was the best for the originator, even though the consumers qualified for other loans,” Kundert said.
Other credit union mortgage lenders took note of UW’s accomplishment.
“UW Credit Union has proven a credit union can lead the way in home finance in their respective market,” said Bob Dorsa, president of the American Credit Union Mortgage Association. “This is not a fluke. When you apply the right combinations of people, programs and strategies designed to truly maximize serving the members' needs, success is imminent. Congratulations to Julio Rios and the entire UW organization because it does take an organization to achieve this kind of success, not just a small group of lending staff,” he added.