SEATTLE, Wash. – Gone are the days – at least for now – when credit unions had to make little effort to count on members walking in the door with their refinance mortgage business. With the end of the latest refi boom, the declining mortgage volume, and the continuing emergence of the purchase market, credit unions are being forced to find more creative ways to garner members' mortgage dollars and remain competitive. While credit unions used to shy away from building relationships with realtors, they're now proactively seeking out these relationships and finding that building a referral network is a critical way to compete in the purchase market. Callahan & Associates focused on the approaches being taken by some credit unions in a webinar on Jan. 26, "Building a Referral Network in a Purchase Mortgage Market" hosted by Tom Geggel. The industry analyst told Credit Union Times, "The big picture story is credit unions' mortgage market share is really low, and they need to cultivate strategies with relevant third-party mortgage providers including agents, mortgage brokers and builders, to hopefully bring more business back to the credit union. In order for these relationships to work, both parties have to feel it is mutually beneficial to work together." Callahan data show real estate loans have grown to almost half of the credit union industry's loan portfolio, but CUs still have a low mortgage penetration among their members – 4.34%. CUs also only have 2% of the mortgage origination market. That's down from 2003 at the height of the refi boom when they had their largest market share – 2.3% – "so this is a declining trend," observed Geggel. He also cited mortgage origination data from the Mortgage Bankers Association that shows refinances are projected to fall to 35% of total mortgage originations in 2006. In comparison, in 2004 refis made up 53% of all originations, and in 2005 they were 47%. According to the MBA, in 2006 the purchase market is supposed to make up two-thirds of all originations. "As home prices are supposed to appreciate less in 2006, there will be a drop off in mortgage business, so credit unions really are going to have to find ways to bring in the mortgage business," said Geggel. While some credit unions have found the best way to build relations with realtors is by leveraging partnerships with other credit unions through CUSOs, others have found ways to pursue strategies on their own. For example, Colorado Springs, Colo.-based Air Academy FCU's unique solution for building relations with area realtors is guaranteeing them the credit union will deliver the closing costs to the title company three days prior to closing or the CU will refund $500 from the borrower's closing costs. The CU has also partnered in the past with five other Colorado CUs and split a booth at the Colorado Association of Realtors convention. Meanwhile for the past 10 years, GTE FCU, Tampa, Fla. along with nine other Florida CUs, has run an annual homebuyer fair. The CUs split the advertising and set-up costs. In addition to inviting members and potential members to attend, invitations also go out to real estate professionals, appraisers and credit bureau personnel. The fair is advertised in the CU's monthly newsletter, on the radio and in newspaper ads. After the fair, each credit union receives a list of all of its members who attended for tracking purposes and follow-up. BECU has developed another strategy. Marie Nunley, realtor development manager for the $5.8 billion CU explained that the Seattle lending environment "is very competitive. Everyone wants to provide that member with home ownership, so there are a lot of home buying options. We're all vying for that member, there's a lot of creative financing going on." Nunley's job at BECU requires her to go out into the community meeting with realtors and representing BECU as a quality mortgage lender. "My goal is to partner with them to help the realtors increase their business by offering them the services BECU offers to its members," she explains. BECU has seen a 12.3% 12-month growth in its real estate loans. As of Sept. 20, 2005 its loan-to-share ratio was 91.4%, and it did $12.6 billion in real estate loans. In 2003, BECU also created BECU Real Estate Services to assist members who are looking to buy a home – particularly first-time homebuyers – who do not have an existing relationship with a real estate agent. There are currently 65 active agents in the program. The agents return 20% of their commission to the members, and BECU credits $250 to the member's closing costs. Additionally, members who attend BECU's "How to Finance Your Home" seminar receive an additional $250 from the credit union. Nunley said the program "creates a level of comfort with our members that we have their best interests at heart." Before launching the program and having partnerships with the realtors, Nunley said BECU would follow-up with members who attended the CU's home buyer seminars and pre-approve them for a mortgage only to have that member go to a realtor on their own and wind up being steered to another lender. "We didn't have a lot of control over that. So we were looking to find a compatible real estate partnership that mirrored our dedication to making sure the member experience was good throughout the entire home buying process. We wanted to make sure that our realtor partners had the same philosophy as us," said Nunley. Callahan's Geggel said more credit unions are going to have to design programs such as these that encourage partnerships with realtors and help keep their members' mortgage loans with the CU. "At the height of the refi boom, credit unions had to make very little marketing effort to get the loan growth they saw. That paradigm is changing now in the purchase market. Credit unions now need to have a very effective marketing campaign with their members and an effective strategy for building relationships to increase their mortgage presence in the community both among members and realtors and others in the mortgage industry," he said. -

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