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SAN DIEGO – CUNA Mutual Mortgage Corp. used the backdrop of CUNA Mutual Group’s Discovery 2004 conference here last week to announce its latest venture – the formation of a users group for mortgage lenders which the company says will create economies of scale for members in the delivery and servicing of mortgages. SHAREX, which was formally launched June 10, will be operated by CUNA Mutual Mortgage under the direction of a board of directors. At press time, the exact number of members of the board hadn’t yet been determined, but CUNA Mutual Mortgage SVP of Home Ownership Solutions Jim McCourt said it will probably be a seven to nine member board – the exact size will be determined by SHAREX participants – and two of the members will be CMM employees. The chairman of the SHAREX Board will be one of the two CMM employees. It also hasn’t yet been decided which two CMM employees will be on the SHAREX Board, but McCourt emphasized that the board will be an advisory board because the organization is a users group. CUNA Mutual Mortgage currently services about $11 billion in credit union mortgages, serving more than 1,000 correspondent (the CU handles the entire mortgage transaction itself and sells CMM the closed loan) or wholesale (the CU takes the loan and does minimal processing; CMM does the balance of the work on the loan) credit unions and 250 direct-to-member CUs (the CU refers the member to CMM which handles the entire mortgage.) But while that sounds large by credit union industry standards – CUNA Mutual Mortgage is the industry’s largest national mortgage lender – that volume still doesn’t generate enough servicing business to take advantage of the economies of scale that are available to larger mortgage servicing companies. The cost of servicing mortgage loans is primarily driven by the size of the lender’s portfolio. “If credit unions service their mortgages themselves, for most of them doing $50-$100 million in servicing it would cost them about $350 a loan a year to service. Servicing would typically be done by internal staff at the credit union, and the price tag includes the cost of the IT system, software needed to run reports, as well as servicing personnel. Most credit unions prefer to do servicing themselves because of the relationship with their members. But servicing also has a lot of legal requirements, and most credit unions aren’t in a position to be able to handle compliance requirements,” says McCourt. By offering mortgage servicing, compliance, reporting, secondary market delivery, and bundling of mortgage services to member credit unions, SHAREX will allow members including credit unions, leagues, and CUSOs to market their mortgage businesses more profitably by combining mortgage lending activities to create, deliver and share economies-of-scale discount pricing, CMM says. One of the key servicing offerings of SHAREX will be full-function, private-label subservicing. That means, McCourt explained, that a credit union’s name and logo will appear on all documents. Mortgage loans CMM currently services are done in CUNA Mutual Mortgage’s name. SHAREX members will also have online access to downloadable real-time data on their credit union’s mortgage activity that McCourt says can be “sliced and diced” any way the CU wants to produce a customized report. He added that the customized reporting tool from Hanover Trade, a leading provider of services to the mortgage industry, will allow a credit union to go in and look at their mortgage portfolio and help the CU stratify its membership to allow for cost marketing. CUs will also be able to take advantage of other cost services such as tax and flood determination, title insurance, compliance assistance, and closing costs. CUs that don’t belong to SHAREX typically pay $2,500 for similar reports from other sources, says McCourt. “We can renegotiate those costs with vendors because of our size and pass those savings on to credit unions,” says McCourt. Membership in SHAREX costs $1,000 if purchased before Dec. 31, 2004, and CUs that join by that date will be locked into that rate for three years. After that, they’ll pay $2,500 annually for membership. In addition, CUs that join SHAREX after Dec. 31, 2004 will pay $2,500 to join. In addition to the various servicing and report generating benefits, membership benefits will include receiving a quarterly newsletter that will discuss various topics such as compliance issues and marketing and the opportunity to attend an annual users conference. McCourt points out that membership in SHAREX is open to all CUs, regardless if they use CUNA Mutual Mortgage for mortgage origination and processing. He also emphasizes that CUs can join SHAREX even if they don’t want CMM to handle their mortgage servicing, and instead take advantage of the other membership benefits. Even before CUNA Mutual Mortgage launched SHAREX on June 10, the company already had four members of the new users group. T&C FCU, Pontiac, Mich. and Washington State Employees , Olympia, piloted the method for adding loans to the system; US Airways FCU, Moon Township, Pa. and America Heritage CU, Ellenwood, Pa. piloted the reporting tools. McCourt estimates it will initially cost SHAREX member credit unions $90 a loan a year for servicing. As more CUs sign on, additional members will further drive down the cost. By the end of the year, because of scale the cost should come down to $85. When that happens – as with future cost declines – CUNA Mutual Mortgage will issue rebates to SHAREX members. “Mortgage loan servicing is a very costly undertaking for credit unions,” says McCourt. “We’re looking for ways to save credit unions money.” -

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