WEST PALM BEACH, Fla. – Mortgage CUSOs, probably more than CUSOsin any other market because of the nature of the mortgage industry,need to build an element of flexibility into their business plansthat allows the CUSOs to adapt to the refi/purchase cycles of themortgage market. “The mortgage CUSO business plan absolutely has tobe flexible,” insists CU Members Mortgage VP Linda Clampitt. “Whenrefis are falling in the door, you find CUSOs are not trying totake in more clients so they can maintain their high customerservice levels and time frames. It becomes more of a take care ofthe credit unions you have signed up,” she adds. That focus changeswhen the mortgage market shifts into the purchase gear, the loanpipeloan slows down, and mortgage CUSOs work to bring in morecredit union clients. In 2003 “when CU Members Mortgage accountreps were in account maintenance mode,” the company added only 20CUs to its client list, says Clampitt. In 2004, more than 100 CUssigned on with CU Members Mortgage. According to Brad Crandall,CEO, CU Companies, it's easy during refi booms, for mortgage CUSOsto overstaff and take on a lot of technology “without stopping torealize that the boom will only last temporarily. Then the CUSOsfind themselves with too much space, employees and technology.”Crandall says CU Companies has always tried to stay staffed for thetraditional purchase market, even during periods of highrefinances. “The refi market gives you opportunities, but you caneasily set yourself up for failure if you design your businessaround a few highs,” he offers. Over the 18 years that CU Companieshas been in business – it was founded in 1987 as CU MortgageServices and now includes six subsidiaries – Crandall says thestrategy the company uses to position itself with credit unionshasn't changed. “We try to sell ourselves more as a departmentrather than a vendor. We consider ourselves complementing themortgage lending efforts of our credit union owners as opposed tobeing just a vendor and the flavor of the month. We try torepresent our organization the same as the credit union would toits members. They know we're owned by their credit union, so itdoesn't have to be transparent to the members.” Likewise, asbranding has become more important to credit unions, Clampitt saysCU Members Mortgage now works more closely with credit unions'marketing directors helping them develop marketing campaigns,identifying what products in their area are hot, and discussingwhich products are doing well and which aren't. Clampitt says shemeets with marketing directors at least twice a year to go overmaterials. “Up until about two years ago, it wasn't as important tocredit unions as it is now that everything be branded in the creditunion's name. It's more important to them now. Even though they'reoutsourcing their mortgage services, they want it to look to theirmembers like it's the credit union's mortgage program,” sheexplains. Joe Zampitella, president, Members Mortgage agrees thatin a purchase market “even more so than in a refi market,” it'scritical for mortgage CUSOs to promote to CUs that they'reavailable and prepared to support CUs' mortgage efforts so therelationship stays between the credit union and the member. “It'snot just a way for CUSOs to differentiate themselves from theCountrywide's of the industry that are established with businessplans to just get loans and do the servicing. It's also a way forCUSOs to reassure credit unions that they're not interested intaking the relationship from the credit union,” Zampitella says.Formed in 1994, Members Mortgage has 90 credit union clients inMaine, New Hampshire, Massachusetts, Connecticut and Rhode Island.Ironically, says Zampitella, credit unions in the New England areahave been reluctant to become seller/servicers despite their longhistory with mortgage lending. Consequently, when CUs need to sellloans on the secondary market and rely on someone to do that forthem, they wind up giving up their servicing rights on the loans.Zampitella wants to change that. “It's time for them to controltheir own destiny,” he says, adding that he's trying to get creditunions to be eligible now to sell direct to Fannie Mae or FreddieMac “while interest rates are somewhat stable. That way, if theyrun into a serious liquidity crisis down the road, they won't beheld over a barrel by the Countrywide's. Instead they'll be in theposition of being able to sell a portion of their portfolio whenthey have to.” Over the 21 years Central States Mortgage Companyhas been in business, President Richard Jungen has seen his shareof “tremendous” cycles in the mortgage market. Still, his businessplan and strategy, he says, has always been focused on the purchasemarket. “We don't rely on refi dollars,” says Jungen, adding thatthe CUSO is set up “give us the ability to be very efficient in thepurchase mortgage market.” Prime Alliance Solutions President/CEOJoe Brancucci agrees that “by developing operational efficiency ina certain product area you can get certain nuances down that allowyou to have experts outside the organization” in both the refi andpurchase mortgage market cycles. Founded in 2000, the CUSO had theadvantage of starting business when lenders and consumers wereenjoying the latest refi boom. But President/CEO Joe Brancuccisaid, “I knew the refi boom was going to end one day and we'd haveto be able to help credit unions develop purchase money business.”The Prime Alliance Solutions president says having a broad productline is key for a mortgage CUSO being able to ride out refi andpurchase market cycles. “In the purchase market you have to be ableto define who you're going after. The mortgage CUSOs that are verysuccessful are the ones that are very niche oriented or becomeincredibly operationally efficient. There's not one example of aCUSO that delivers all things to all people,” says Brancucci. -

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