The American dream of home ownership may have taken a hit over the past few years, but GTE Financial in Tampa, Fla., still wants to build mortgage lending into its plans.
A key part of that effort is a new CUSO, the GTE Financial CUSO Home Loan Alliance, which will combine the subsidiary’s processing, secondary market and serving staff with Leverage Financial, the correspondent lending firm that was already providing mortgage processing and real estate title services to GTE Financial. Leverage will take on the new CUSO's name.
The $1.5 billion credit union said it handled more than $213 million in Home Affordable Refinance Program loans between March and October 2012. Processing those 1,100 mortgage applications underscored the need to enhance the entire mortgage process.
Aaron Bresko, GTE Financial senior vice president of lending, said HARP was one part of the strategic lending picture. With the program set to expire in 2014, the CUSO represents a long-term approach.
“We’ve been working with a third party, formerly called Leverage,” Bresko explained. “They had a processing group, a wholesale correspondent group and a title group. It was a good match, and we worked well with them. Both companies were interested in a lengthy partnership.”
GTE Financial boasts more than $1.5 billion in assets and accordingly, a lot of structure, while Leverage was a smaller company, Bresko said.
“Merging the two cultures was one of our initial initiatives,” Bresko said. “It actually went fairly smoothly. We figured out ownership shares as well as the operating agreement. Without a doubt, it helped that we had worked together before. We knew them, they knew us.”
GTE Financial moved mortgage production staff from the credit union to the CUSO because that is where all production will now take place, Bresko said. While not much job training was initially needed, Bresko said that will increase as the computer systems are consolidated.
For the members, the CUSO is intended to be transparent. As far as they are concerned, throughout the process, they are working with someone from the new lending subsidiary. Although some mortgages are sold to Fannie Mae and Freddie Mac, GTE Financial retains servicing, Bresko said.
The CUSO will also provide a turnkey operations center for mortgage lending to credit unions that have reached their limits on their ability to handle mortgage volume or lack the on-staff resources.
“For the first six or nine months, we’ll really concentrate on fine-tuning the operations and culture, so it’s not a part of our immediate business plan,” Bresko explained. “But there is a lot of interest among both large and small credit unions. They all have different needs. Smaller ones may just want to refer members to us. Large credit unions may want to outsource some steps in processing.”
Robert Dorsa, president/CEO of the American Credit Union Mortgage Association, definitely agrees that both large and small credit unions might be interested.
“Small credit unions will have to offer their members products such as mortgages or go out of business,” Dorsa said. “Large credit unions may not want to invest in compliance and other costly factors.”
Ninety percent of credit union members are getting their mortgages somewhere else, Dorsa pointed out.
“Offering mortgages is a very mature decision, and a pragmatic look at their business model. The foundation of a relationship with a financial institution is a home loan. When a credit union writes a home loan, the borrower usually has seven or eight other products with the credit union. You keep the members engaged.”
Dorsa said mortgage CUSOs have been around for about 30 years. In the beginning, the home loans were intimidating to small credit unions. Today, some of those fears have been eased, he offered.
Meanwhile, as mortgage rates start climbing from record lows, some homebuyers may pause as they face larger monthly payments. What impact does Bresko see in the Tampa Bay area?
“I started here [last] January and prior to that, I was in Seattle for 47 years. It’s a brand new market to me here,” Bresko explained. “There are definitely signs of hope and recovery, especially in some specific areas of the Tampa region.”
GTE Financial is taking advantage of the opportunity to help its members with HARP because these are people who couldn’t refinance at today’s low interest rates due to not having equity in their homes, Bresko said. Now, they can qualify for $200, $300 or $500 less a month based on lowering their rates, he added
“When rates go up, we won’t have the refinance activity. So we’re really trying to focus on a purchase strategy that will put us top-of-mind when our members are looking to buy a home,” Bresko said. “I think we really need to focus on home ownership because that’s how we build communities.”