BOSTON — Loans that don't comply with the Consumer FinancialProtection Bureau's qualified mortgage rules present an opportunity for creditunions, because they will represent about 25% of all mortgage loanproduction, said Barry Stricklin, vice president of real estatelending for the $2.7 billion Tower FCU.

The Laurel, Md.-based executive presented a breakout session onproject management for new mortgage rules Wednesday afternoon atNAFCU's Annual Convention at the Hynes Convention Center inBoston.

Also at NAFCU Annual Conference:

• 4 Big Things from Confab
• Becker Calls it a Wrap
• Dollar Says Let Golden GooseLive
• Matz Reveals New Risk Rule
• Thursday in Pictures
• Non-Interest Income Balance
• Berger Promises Training Boost
• CFPB is Good for You
• Beantown Vox Populi
• Wednesday in Pictures
• Managing Outsourced Collections
• Losing Money at Loan Closings
• New Officers for 2013-2014

“I've heard Bank of America say they aren't going to make anynon-QM loans, and I hope they do that,” Stricklin said. “There isan opportunity here to fill that void. I'd encourage you to be partof that lending world that says you'll do it. You shouldn't beafraid to stand behind your underwriting.”

However, he also said the decision to offer the loans hinges oninterest rate risk and a credit union's ability to effectivelymanage it on the balance sheet.

Stricklin said Tower has created a matrix of real estate loanproducts that evaluates each in regard to how they will be affectedby the new mortgage rules, whether or not they will be purchased byGSEs, and if not, the effect on interest rate risk to hold them onthe balance sheet.

In response to a question from the audience regarding apotential private market for non-QM loans, Stricklin said thatRaj Date, the former deputy director for the Consumer FinancialProtection Bureau, is in the process of building a firm that willcreate a secondary market for the loans.

And, he said, the GSEs may reverse or modify their decision tonot purchase mortgages that don't fall into the qualified mortgagecategory.

“It's hard to say what they are going to do,” Stricklin said.“Twelve months from now, will they buy a 40-year loan? Because asrates go up, you're going to reach a point where a 40-year productwill be important for first-time homebuyers, and they'll facepolitical pressure to support that. So you may see GSEs decide tobuy them.”

However, he cautioned, credit unions can't count on anaccessible non-QM secondary market or a policy change from Fannieor Freddie.

“You have to be comfortable that if you're putting something inportfolio, you can keep it there. Sure, you may be able to sell itdown the road, but there's no guarantee,” Stricklin said.

Once the matrix is complete, Stricklin said, management shouldshare the information with volunteers.

“If you're going to start eliminating products, it will probablyhave to go to the board. And, even if you're not going to eliminateanything, at a minimum at least present it to the board so theyknow what's going on,” he said.

Rules that require new disclosures and additional statementrequirements will make it impossible for credit unions that offerreal estate loans to continue providing combined statements tomembers, Stricklin said.

That will mean additional costs, he said, but added that eSignAct rules can make the process less painful.

“What the CFPB decided is that these statements don't have tocomply with the eSign Act,” he said. “They will allow presumedconsent, which means if a member has said they are OK withreceiving statements electronically, you can assume they are alsoOK with getting these new statements electronically.”

The cost difference is significant, he said. At Tower,electronic statements cost $2 per member to deliver annually,compared to $9 for paper statements delivered by mail. That wouldmean $70,000 worth of annual savings if 10,000 could be deliveredelectronically, Stricklin said.

“So take advantage of that,” he said. “Because the eSign Actdoesn't apply, all members have to do is give a verbal okay toreceiving it electronically. Use your front line people. Have themask members about it. The more of that you can do, the less it willcost.”