Credit unions smashed through a previous record in the first-quarter 2012 when they originated 8% of all mortgages made in the U.S. Now there are signs that their success represents more of a sustainable trend than a mere statistical anomaly.
“I definitely think it’s more than a flash in a pan,” said Scott Toler, CEO of the Credit Union Mortgage Association, a housing finance CUSO headquartered in Fairfax, Va. “I think it’s the result of more credit unions waking up to the importance of housing finance and finding the confidence to start offering mortgages to their members.”
Toler didn’t say so, but other credit union housing executives credited his CUSO and others like it with helping credit unions both realize the importance of offering mortgages and gaining more confidence about being able to do it. The majority of U.S. credit unions still don’t belong to CUSOs like CUMA, CU Realty Services or TruHome Solutions, the executives acknowledged, but enough do that their impact has begun to be felt among a growing circle of credit unions.
Toler said CUMA, founded in 1978, is among the oldest mortgage CUSOs. CUMA currently has 60 participating credit unions, 48 of which have taken the step of investing in the venture, Toler said. The CUSO offers mortgage origination services, processing services, underwriting services, closing services, mortgage servicing and sales services onto the secondary market for both conventional and government-backed mortgages.
“We can help credit unions pick up any part of the mortgage process that they don’t want to do themselves,” Toler said. CUMA offers these services under its own name or works with a credit union to offer them under the credit union’s name in an agent relationship. The organization booked $500 million in mortgage loans in 2011, he said, and was on track to do better than that this year.
CUMA has been picking up new member credit union every each year for the past 10 years and has noticed the pace has been picking up in the last three years, Toler said. The CUSO has traditionally worked with credit unions in the Washington D.C. area, but it has branched out to other states as well.
Most of the growth has come from credit unions moving from other mortgage CUSOs to CUMA, he said, but he added that the CUMA still viewed the new growth as helping to increase the overall credit union mortgage pool.
“If a credit union comes to us from another mortgage CUSO, that is likely going to be because they haven’t been happy with their fit with that organization,” Toler explained. “Maybe they haven’t been originating many or even any loans with the old CUSO, and their volume increases sharply when they come to us.”
CUMA also offers access to other housing finance services. One of these is CU Realty Services, a CUSO headquartered in Scottsdale, Ariz., that focuses on helping credit unions get a head start on meeting members mortgage needs.
CU Realty provides a program, website and expertise designed to help credit unions become the first place where credit union members visit when seeking information about potential real estate purchases. The program allows a credit union to help a member research neighborhoods and homes online along with finding a qualified Realtor.
“Instead of coming in at the end, when members are looking for a lender, credit unions can be the first contact point,” said Mike Corn, CEO of CU Realty Services.
“We’re pleased to offer the CU Realty program because it will help increase Belvoir Federal’s mortgage market share because it puts the credit union at the start of the home-buying or selling process,” said Tisha Wallace, chief operating officer for the $290 million Belvoir Federal Credit Union. “Even more, CU Realty is designed to save members some 20% in agent commissions.”
Wallace added that the program would also help Belvoir confront what has become a perennial problem for many credit unions that offer housing finance: how to let members know that mortgage loans are available.
“It may seem surprising, but like many credit unions that have offered mortgages for a long time, a lot of our members still don’t know we provide this service,” she said. “We think CU Realty will help us reinforce the benefits of our mortgage services.”
Tina Powers, CU Realty’s chief operating officer, said that helping credit unions teach their members that they offer mortgages and letting them get a jump on the mortgage process is a big part of why the CUSO exists.
“What we want is for a credit union member to have started working with their credit union on buying a home six, seven, eight or nine months before they ever fill out a mortgage application,” Powers said.
Working with CU Realty Services brings the credit union in at the start of the buying process which almost guarantees that the credit union will originate the mortgage, Powers explained. And having a pool of Realtors who have already agreed to rebate 20% of their commissions directly benefits the member. “That 20% can be a real help for a member who is struggling to make their closing costs meet moving expenses,” Powers noted.
Like CUMA, CU Realty Services has started picking up more member credit unions again, particularly once the real estate market in some areas began to pick up and as more credit unions become aware of the need to make more purchase money loans and not rely as much on refinancing existing mortgage loans.
Another housing finance CUSO, TruHome Solutions, headquartered in Lenexa, Kan., has achieved a milestone, servicing more than $2 billion in credit union-originated mortgage loans.
The CUSO, owned by the 169,000-member, $1.9 billion CommunityAmerica Credit Union, also headquartered in Lenexa, and the 53,000-member $460 million Mazuma Credit Union, headquartered in Kansas City, Mo., has 90 participating credit unions since its founding only seven years ago.
Many of the now participating credit unions had only moribund housing finance programs before they started working with TruHome or no housing finance program at all, according to Keith Varney, chief operations officer for the CUSO. In many cases, the credit union had outsourced its housing finance operation to a mortgage broker or bank, Varney explained.
“We had one large credit union which had done that and then came to realize, ‘What are we doing? We send this business out the door and do not benefit from it,’” Varney said.
Credit unions participate with TruHome at two levels. Credit unions in the CUSO’s private label program work with the CUSO in an agent-issuing relationship. where the CUSO assumes different parts of the housing finance process in the credit union’s name, but the participating credit union funds the loan. Credit unions in the CUSO’s partner program allow the CUSO to handle all parts of the housing finance process in its own name, and TruHome funds the loan.
Although the CUSO launched the partner program for primarily smaller asset credit unions, Sherri Smith, TruHome’s vice president for business development said that larger asset credit unions have also partnered with the CUSO to take advantage of the CUSO’s ability to process and originate loans with government backing.