While 2003 was the most productive year in the history ofmortgage lending volume, 2004 may be an even better year for creditunions to grow their mortgage business. There are many elementsthat are aligning to make this an ideal environment for creditunions to take either a bigger step, or that first step, intomortgage lending. Now is the perfect time to grow your mortgagebusiness, because: * Continued low interest rates – The trendcontinues from 2003 with rates still at or near-historic lows. *Accelerated job growth – Recent Federal Bureau of Labor Statisticsdata indicates 308,000 new jobs were created in March. That is thelargest monthly increase in more than four years. With more peopleworking, there are more opportunities for homebuyers. * Strongconsumer confidence – In January, the Consumer Confidence Indexsurged to its highest level since July 2002. Since January,consumers' confidence has remained steady, indicating there'soptimism about the overall health of the economy. * Start oftypical home buying season – Spring and summer signal thehome-buying season when families begin to relocate before the fallstart of school. The National Association of Realtors (NAR)projects 1.4 million new homes will be built in 2004, with 1million of them sold this year. NAR also predicts 5.66 millionexisting homes will be sold this year, which is just under lastyear's record total. * Stock market continues to climb – The DowJones Industrial Average has gained almost 1,000 points sinceNovember and has consistently been around the 10,500 mark, orabove, since January. The Dow was below 8,200 one year ago. All ofthese factors signal a great opportunity for credit unions tobolster their mortgage lending programs, but you need to be able toact now, versus reacting later. The good news about the economycould actually portend the end of low interest rates. The increaseddemand for housing and the availability of purchase money may exertpressure on the Federal Reserve to send rates upward four to fivemonths from now, due to an improving economy. The mortgageorigination market does best during a weak economy or in a newlyrecovering one, and since we are trending toward a strongereconomy, the Fed may raise rates by the end of summer. It's a cruelirony that when people begin to feel good about their financialhealth, interest rates go up. Credit unions need to make theirmortgage operations run as cost effectively as possible. Look forways to partner with peers or with vendors to take advantage ofeconomies of scale that can be achieved by leveraging large volumesof business. As I suggested a year ago in this space (CU Times, May28, 2003), credit unions need to be attentive to the unique needsof first-time homebuyers. Members need to know you are in themortgage business long before they decide it's time for that firsthome. Consider hosting home-buying seminars or offering crediteducation seminars to help better prepare members for thehome-buying journey. One of the unique tasks for first-time homebuyers is to find a program that fits, not only their financialsituation, but also their housing needs. Over the years, manyfirst-time homebuyers have had to settle for much less, becausetheir financial institution was stuck in the mindset that if theycouldn't fit into a conventional 15-20-30 year loan, then theyweren't mortgage material. Today, nothing could be farther from thetruth. Presently, there are plenty of opportunities to put manynon-traditional homebuyers into affordable homes. Credit unionsneed to be creative in their mortgage product offerings and utilizethe flexibility that mortgage insurance offers. For members whohave yet to establish a credit history (i.e. recent collegegraduates), but have the financial means to easily afford monthlypayments, there are product offerings such as Affordable Goldproducts. There are currently low-down-payment mortgage productsavailable that, once again, target those with the financial means,but who do not have the thousands of dollars necessary for thedownpayment and closing costs. Products such as a 100% LTV, Alt 97and Affordable Gold 97 can accommodate this kind of member. Anothernon-traditional home buyer who has the ways and means to own a homeis the self-employed business person, who may not have all thestandard income documentation available. Programs like a NoIncome/No Asset, No Ratio or Stated Income would handle a situationlike this. The American Dream is becoming reality to more and morepeople thanks to recent government programs and legislation, suchas the FHA's No Down Payment program for first-time homebuyers thatcould open doors for more than 150,000 people each year. Creditunions need to effectively deliver their mortgage message tomembers. During the past two years, marketing your mortgage programmeant making sure the doors to your credit union were open and youhad a telephone at your desk. Business came looking for you.However, those days are gone. In today's environment you mustmarket your mortgage program. It's astonishing that less than 10percent of credit union members who have mortgages have them attheir credit union. Many members say they didn't even know theircredit union offered mortgages. Take every opportunity to enlightenthem. Have information available at your counters, on your Website, in your mailings. In addition, if you use radio, TV ornewspaper advertising, be sure to plug your low rates, fastturnaround and friendly service. Whatever you do, don't miss thechance, because you may not get a second one. Remember that thebiggest purchase a consumer makes in his/her lifetime is a home.It's not a decision made hastily. Much thought goes into findingthe perfect and affordable house to meet their needs, thenarranging the financing. Research indicates the consumer views thefinancial institution that has their mortgage as their personalfinancial institution (PFI). In other words, there is a comfortlevel and trust established between the two of you during thislong-term partnership, which very well could last a lifetime. Assuch, they are much more likely to need and buy other financialproducts and services from you. True, the mortgage business is arevenue generator, but it is also a commitment to your member thatyou are there for them, no matter what financial situation mayarise. If they take their mortgage business elsewhere, they maytake everything else with it. Work hard so that doesn't happen.

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