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CENTREVILLE, Va. – Credit unions’ difficulty in cracking the 2% share of the mortgage market for some years is well-known, but Carteret Mortgage isn’t ready to accept the inevitability of that. In fact, the company has designed a credit union program it says may be just the ticket the CU industry needs to get over the 2% hump. “If ever credit unions needed help with mortgage services it’s now that we’re in the purchase market,” says Christine Kimball, VP, Business Development for Carteret Mortgage. “Builders will be more sophisticated and there will be more pressure on credit unions to meet certain deadlines,” she added. The new program from Carteret Mortgage which did more than $3 billion in mortgage loans in 2004, is designed for small credit unions and is based on three years worth of research data collected by the company from Fannie Mae as well as direct interviews with small credit union officials. “The larger mortgage entities are more interested in forming relationships with larger credit unions, but small credit unions are not really of interest to anyone and they’re usually the ones who need the most help,” said Kimball. Those small credit unions that are involved with mortgage lending typically only offer fixed-rate or home equity loans. So if a member needs a more specialized loan or an adjustable rate mortgage and the credit union isn’t capable of handling that, they lose the member’s mortgage dollars to another lender. From conversations with small credit union representatives, Kimball, discerned that there are two sides to the problem. On the credit union side, Kimball said, “the number one problem small credit unions have with offering mortgage services is finding partners who can either help them start their own program or help them improve their existing program. When a consumer is making the transition into the home buying market, they want to be able to look their mortgage person in the eye and have face-to-face interaction. They want face-to-face counseling. Credit unions don’t like the idea of sending their members to a call center or Web site for mortgage information, or worse referring members to other entities for mortgages because those companies often wind up cross-selling the members on other products.” On more than one occasion, credit unions said, “if I can’t provide the service myself, I want to be able to trust who I’m sending my member to.” On the flip side, sometimes the cause of small CUs’ frustrations with providing their members mortgage services lies with the member. “Members’ expectations can be unreasonable, they sometimes expect overnight approval despite the fact they’ve provided insufficient documentation,” Kimball says. “Or some members don’t understand there’s a difference between auto lending and mortgage lending. They don’t understand why if their credit union was able to give them an auto loan with few problems, it should be more difficult for them to get a mortgage with the credit union.” To make matters worse, since few small credit unions have relationships with other mortgage entities like realtors, members get frustrated when the CU can’t refer them to someone else. Kimball said her thinking behind developing the new program to help small credit unions offer mortgage services was simple: brokers capture approximately 60% of all mortgage loans because they’re tapped in to so many lenders, so why not find a way to marry the broker industry with the credit union industry and create a partnership. “Our objective is to work with credit unions that have very limited or, no mortgage programs and work our way up,” she said. “Take the best of what we have to offer and offer it to the credit union industry. “We realize there are some credit unions that will never offer mortgages. Their boards won’t approve it because they’ll say the credit union is too small or they’re not interested. But there are still many credit unions that want to offer mortgage services but don’t have the resources. These are the credit unions we want to work with,” says Kimball. ” Carteret’s mortgage program for small credit unions entails using the mortgage platform of Nationwide Advantage Mortgage, a subsidiary of Nationwide Insurance, as their primary lender. Credit unions will be trained on how to use the Nationwide platform and will be able to originate the loans themselves. Nationwide in turn will underwrite and process the loan, and the credit union will receive compensation. The mortgage loans will be sold on the secondary market to Fannie Mae which Nationwide has a relationship with. Members can apply for the loans online or in person and receive a free loan approval decision in as little as 10 minutes. What’s more – and most important to credit unions – the CUs retain servicing rights. The flexibility of the program that allows credit unions to basically design their mortgage relationship with Carteret is one of the features that appeals to Marsha Billups, treasurer, New Life CU, Philadelphia. The 800-member, $600,000 in asset community development credit union that opened in September 2003 and serves west Philadelphia, currently only offers savings accounts, money orders, tax preparation services and small personal loans. Billups says the CU wants to be able to offer all the products and services members ask for and “ is looking to establish alliances and partnerships with larger financials including credit unions, banks, or anyone else that’s willing to work with us and that offers the services we want to offer but don’t now.” She explained that New Life offers financial counseling that covers home ownership “but we want to get more into offering home buying and mortgage services.” Billups said New Life would like to have a mortgage partnership by the end of 2005 and is considering signing up for the Carteret program. “Every credit union will have different needs and wants. We want to create a relationship with all small credit unions because we’re sure they’re a viable solution to the problem of credit unions being able to only capture a low ratio of mortgage loans from their members,” said Kimball. -

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