The biggest obstacles to credit unions launching or growing a housing finance program are lack of staff, concerns about compliance and a lack of leadership from the highest executive levels, according to credit union executives and housing finance consultants.
“Any credit union that wants to start or expand a housing finance program needs to hire or retain the right people, defined as hiring people to find and competitively process and close loans,” wrote Robert Dorsa, president of the American Credit Union Mortgage Association. “This would also include proper training for all, including management of the CU.”
Dorsa acknowledged that in many ways this would be the most obvious requirement but added that in many parts of the country, finding staff qualified in housing finance to work as loan originators or loan officers is becoming increasingly difficult.
“The fact is, this has become a more highly specialized field, and the people who are knowledgeable about it and have the right skills are often too highly priced for credit unions to get,” explained Alissa Sykes, director of mortgage lending at Sunmark Federal Credit Union, a $374 million 45,000-member credit union headquartered in Latham, N. Y., a community near Albany.
Sunmark has a strong housing finance program that Sykes explained has gone from booking $5 million in housing finance loans in 2006 to over $220 million in 2012 with additional growth expected this year. But even with all that success and large housing finance department (housing finance takes up 25 of the credit unions 175 employees), Sykes said the credit union recently decided to begin relying on training in-house talent for its new staff because hiring from outside the credit union has become simply too expensive.
“These days a person with the sorts of skills that are going to attract us can almost write their own ticket, and that is usually too expensive for us,” Sykes said. “But often a larger bank with greater resources are able to meet their pay requirements.”
Tracy Ashfield, president of Ashfield and Associates, a consultancy that specializes in helping credit unions largely agreed with Sykes and Dorsa that staffing can be a challenge but observed that the phenomenon was not uniform across the country.
“I would call this a primarily regional challenge,” Ashfield said. “Some parts of the country are almost seeing a drought in skilled mortgage staff while others areas are nowhere near as bad,” she said.
She recalled the circumstance of a credit union client that she declined to name that faces a similar problem. As a leading financial institution in its community, the credit union wanted to further expand its housing finance program but discovered that doing so by hiring from outside would be very expensive. The credit union opted instead to train and promote from within.
Robert McKay, CEO of the 166,000-member $1.7 billion Baxter Credit Union also said that finding or training staff to have the right skills would be one of the biggest hurdles all credit unions that offer housing finance loans will face whenever the current period wave of refinancing subsides.
Baxter booked $454 million in fixed-rate mortgage loans in 2012, according to NCUA records.
“We really have been nursing along on the refi-boom, and that is going to come to an end eventually,” McKay observed. “Then we will face a test of whether we can continue the pace on purchase loans and not just refinances.” Too make that shift, credit unions will need a supply of trained housing finance staff in place, and it’s unclear that many have yet begun the necessary training or hiring, he added.
Pat Sherlock, president of QFS Sales Solutions, a Philadelphia-based consultancy that works with financial institutions, including credit unions, to improve their housing finance programs added that, in many parts of the country, the staffing problem extends to banks as well. In addition to having people who can process home loans and keep track of regulatory requirements, they also need to be sales professionals she said. And finding people who can do all three things is going to become significantly more difficult.
Compliance and concerns about compliance were the second major obstacle that the executives and consultants identified.
“When the CFPB released that almost 5,000 pages of regulations about all parts of the mortgage industry, it pretty much swamped us at first,” Sykes said. The credit union had compliance staff inside as well as a relationship with a vending firm, which helped with some aspects of compliance.
Ashfield said establishing relationships with compliance and mortgage issuing CUSOs were very valid options for credit unions looking to get started in housing finance, but she emphasized that when it came to compliance, a credit union needed to have at least enough of a grasp of the issues to be able to do due diligence with any compliance CUSO or vendor it might choose. The credit union should at least be able to know which questions to make sure the CUSO or vendor answers.
The last challenge to be met is the question of leadership from the top, according to the executives. Starting a housing finance program is the sort of move that requires a full buy in from the credit union’s leadership because mortgages are such a different sort of lending than consumer lending.
“It’s often very hard to find consumer loan officers who can make an easy transition to mortgage lending,” Sherlock said. Most consumer lending can have gray areas, places where a loan officer can downplay some things and highlight others to help the application go through, she explained. But housing finance lending has become much tighter, much more black and white, she added, “In many ways, it’s a different business.”
McKay and Sykes agreed that having a housing finance program in place can mean a credit union has to see itself and its role in its member’s lives differently, less as something tangential and more as an institution which will be central to its members.
Having a housing finance program, Sykes said, has brought the credit union cross-selling opportunities that it had not foreseen and lead to the credit union to offer a full suite of products and services.
“They’re always so surprised to find out we are full service,” Sykes said. “That we can handle their home owners insurance and other needs. It’s like we have made our relationship with them just that much deeper and more important,” she added.