Have you ever noticed howintrigued the American culture is with things that are retro? My two 20-something sons love retro clothes, especiallysquare-bottom, striped knit ties. We buy everything from toastersto cars all designed to look like grandma's. We spendmillions of dollars each year designing new homes and additions tolook like those much-admired 100-year-old homes we dream of livingin … crazy fascinations with “what's old is new again,” right?

Like all things retro, they have to disappear for a while beforethey return as trendy. The next “comeback” is right around thecorner in the lending industry too: the return of the secondmortgage and HELOC. The difference is today's products must beproduced better, more cost-effectively and safely and with far moreconsumer understanding of what's being purchased.

There's an abundance of statistics that provide ample reason tobelieve the second lien business is on its way back with a fury anda growing opportunity moving forward for credit unions. TheNational Association of Realtors has shown that sales prices (andhome appreciation) have consistently grown quarter-to-quarter forthe past 18 months. Realogy Holdings Corp., the parentcompany of the franchise group including CENTURY 21, ColdwellBanker, ERA and other well-known brands, launched an IPO last yearthat has traded at a 30%+ premium since then, with commissionrevenue growing as a result of higher sales prices.

With more than half of American homeowners refinancing theirinterest rates to historical lows, many believe consumers will nowlook to home improvements, as opposed to buying up, as a way ofmaking more room, increasing square footage and raising homevalues. If you are not convinced yet, check out the stock growth ofThe Home Depot, which is well-positioned to be the beneficiary ofharvested equity dollars driving home remodeling and expansionactivities.

Next Page: Jump the Trend

Get On Board the RetroTrend

As credit union executives, how can you prepare for and maximizethis coming retro lending trend? Here are some things toconsider.

As the second lien business lay dormant for nearly five to sixyears, much has changed in the regulatory requirements necessary tostay compliant with all the reforms, Consumer Financial ProtectionBureau, Real Estate Settlement Procedures Act, etc. Many financialinstitutions are re-evaluating their product positioning, pullingsecond lien lending out of the consumer loan area and moving itunder the watchful eye of the residential mortgage group.

Along with building your capacity to handle growing second liendemand comes increased scrutiny from regulators who make sure yourcredit policies are updated, your collateral assessment proceduresare safe and sound, and that your members are receiving compliantdisclosures, required notice periods and updated, uniformdocuments.

Like our retro toasters and cars, the second lien products maylook the same, but will likely take longer to produce, be moreexpensive to create and require more manpower and technology tokeep up with the current times.

If history repeats itself, credit unions and other depositorieswill be producing three to four second-lien mortgages for everyfirst mortgage within the next 24 months dramatically changing themarket dynamic that has existed since the housing crisis.

With the ever-changing, highly active regulatory and complianceenvironment, there are good alternatives for credit unions toconsider as they switch gears to assist their members with thereturn of second mortgages and HELOCs. There are also optionsto ensure the new products are produced better and morecost-effectively and safely for your members and your creditunion.

You may want to leverage an outsource provider to support yourability to meet the rising demand. Maybe these providersnever touch a second mortgage or HELOC loan, but, perhaps, theymaintain status quo in your first mortgage business and allow youto re-allocate internal resources to the greater memberdemand.

You can partner with a provider on a variable cost basis andallow them to provide ongoing flexible capacity for growth in yourbusiness or non-core segments. Or you can hire internally to meetthe demand, make upgrades to existing systems and go forward onyour own.

There are several options, plenty of strategic executionstrategies, but perhaps, not plenty of time. Although mortgagebankers are typically disenfranchised in this product space becauseof the lack of a balance sheet, many consumer-direct firms andnon-traditional depositories are already well into taking amarket-leading position for this product.

It is important for credit unions to be viable and able torespond to their members' second lien needs. Unlike the purchasemoney first mortgage business, there will be a propensity forconsumers to look first to a trusted, Main Street provideras the second lien trend grows.

Being quick, decisive and purposeful about the development ofthis retro product and its support mechanisms will position yourcredit union as your members' provider of choice for the nextseveral years.

Joe Camerieri isvice president of sales at LenderLive Network Inc. inGlendale, Colo.