SANTA ANA and HUNTINGTON BEACH, Calif. – Five years after jointly forming PrimeDirect Mortgage, Orange County's Credit Union and nuVision Financial FCU have made the strategic decision to dissolve the mortgage CUSO and move their respective mortgage lending operations in-house. Lynda Hill, senior vice president for OCCU said the intent of closing the CUSO “is to bring the operations in-house to allow each credit union to better concentrate on the mortgage needs of their memberships.” Both credit unions say the business decision was mutual. “As part of the on-going business of the CUSO, every year we looked at whether the value it was delivering was greater than the value each credit union could achieve on its own. We validated it annually,” said nuVision Financial's Kerry Lewis, chief sales and marketing officer. Prior to when the PrimeDirect Mortgage was formed in 2001, Orange County's CU used a third-party vendor for its mortgage lending services. Hill said when the credit union got its community charter, “it seemed like a good opportunity at the time for the two credit unions to collaborate in the CUSO effort. You always want to see how you can operate most efficiently.” nuVision also was involved with mortgage lending before the CUSO was formed, but unlike its CUSO partner, the $651.7 million credit union managed its program in-house. Lewis said the credit union at the time had a limited product line, and “we anticipated the mortgage business would grow in importance, especially with the refi boom. We knew our members would demand a wider product line, and we needed more expertise than we were ready to commit at that time. “In addition we were developing other products,” he continued. “We decided if we could combine our assets with Orange County's Credit Union, we'd get economies of scale and be able to buy some talent to extend our product line to meet our members' needs. Forming the CUSO almost immediately gave diversity to our product line.” So what's changed for both credit unions to make them want to dissolve PrimeDirect Mortgage? For Orange County's CU there are several factors that influenced its decision to go it alone with its mortgage products. For one thing, Hill says Orange County's CU is now a larger organization than it was in 2000 – $805 million in assets now compared to $538 million then. It also has stronger experience and capability in mortgage lending. The CU processes HELOCs, second mortgages, and portfolios adjustable rate mortgages and short-term five-, seven- and 10-year fixed mortgages in-house. It sells 30-year fixed-rate loans on the secondary market. In addition, she says Orange County's CU has the physical size and space at its corporate headquarters needed to accommodate first mortgage processing which it didn't have five years ago. There is also the important issue of the CUs' differing fields-of-memberships and the difficulty Hill said that created in coming up with marketing that targeted both memberships. Orange County's CU's FOM includes Orange County and the neighboring communities of Long Beach, Signal Hill, Lakewood and Cerritos. “The marketing was missing our market,” said Hill, adding that “nuVision's membership is older, and ours is younger. We want to be able to grow that membership, and one way for us to do that is to design marketing pieces for our products that appeal to our membership.” Lastly, Hill said there was also the issue of the difficulty Orange County's members had making the connection between the PrimeDirect Mortgage name and the CU's identity. “What does the word `CUSO' mean to members? It appeared to be a third party. There was a disconnect with the CUSO's name between that business and the credit union,” she said. Like Orange County's CU, nuVision's Lewis said his credit union's staff “has more depth” than it did in 2001 and is better capable now of directly controlling the mortgage process. At year end 2005, the CU had $170.9 million in its mortgage portfolio. It keeps all fixed rate and adjustable rate mortgages in its portfolio but sells interest-only loans and other “weird, exotic ones” on the secondary market. In addition, with the refi boom ending and nuVision's mortgage volumes expected to drop, he said “it makes more sense economically to bring it in-house.” He agreed with Hill that the name `PrimeDirect Mortgage' was sometimes confusing to members who didn't associate it with either credit union and thought it was a third-party instead. As for the field-of-membership issue that Hill raised, Lewis said the majority of nuVision's 53,479 members are Boeing employees – the CU was formerly called McDonnell-Douglas West FCU. It has an association charter and is tied with the American Consumer Council. “For a long time Boeing's business was focused more on production and the employees tended to be older. Within the past five to 10 years, the company's been shifting its focus to the technical and engineering areas. Now they're attracting younger employees, so there's a mix,” he explained. While the two credit unions had different fields-of-membership, Lewis doesn't think that factored into the decision to dissolve the CUSOs. Nor does he think it created marketing problems. “The biggest issue with mortgage marketing is making sure you're in the member's face when they make the decision to refinance or get a first mortgage. You can have the best market, but if you're not top of mind when they make the move then you're going to miss the opportunity,” he said. “The major issue for members when it comes to mortgages is knowing credit unions are a source,” Lewis added. Like Orange County's CU, nuVision Financial also plans to hire some of the CUSO's employees. Lewis explained that the cities of Santa Ana and Huntington Beach are only about 10 miles apart from each other, so it's unlikely employees will have to relocate. As PrimeDirect Mortgage goes through the process of being dissolved, all mortgage applications that are in the pipeline will run through completion and then the respective credit union will handle the servicing. Lewis thought the cut-off date for the pipeline was mid-February. As for any questions either credit union has received from their members concerning the dissolution, Lewis said nuVision has reassured them the strategic move will not effect the processing of their mortgage applications. -

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