JENSEN BEACH, Fla. — John Nelson is very familiar with the Florida mortgage market and credit unions' reluctance to offer loans they consider too risky. But the founder and president of Florida Member's Mortgage says credit unions' attitudes need to change so they can better respond to the state's demographics and members' needs.

Nelson has been involved with mortgage lending for credit unions in Florida through Florida Member's Mortgage for nine years when he founded the company as a privately-owned credit union mortgage broker, but his credit union experience actually pre-dates that back to 1981. He started out at Seattle Pacific University CU and has also worked at King County CU, Seattle; Gold Coast FCU, West Palm Beach, Fla.; CUNA Mortgage Corp.; and the Florida Credit Union League.

“Most credit unions get excited about mortgage lending, but they're not willing to expand their product lines to include things like 100% financing or combination loans or even do non-prime loans because they think those types of loans are too risky or too complicated to offer. But when they don't offer those types of services their members go somewhere else for them,” Nelson opined, adding, “We're able to bridge that gap.”

When he first started doing business in Florida, Nelson concentrated on doing traditional Fannie Mae and Freddie Mac-type loans. But then he began doing work for the Central Florida Chapter of Credit Unions, and he made credit unions aware that “they're ushering credit union members out the door inadvertently by not giving members with less than perfect credit an alternative.”

Nelson estimates credit unions in Florida lose one out of every two to three mortgage applications from members because they don't have a nonprime program.

“There are a lot of people out there in Florida with less than perfect credit,” said Nelson. “You still have a predominantly service-based economy in Florida where people don't earn a lot of money. Up to a few years ago, the cost of housing in the state was much lower than it is now especially in areas like Palm Beach County. The median household income there now is $65,000, and still about 85% of the population can't qualify for a mortgage because the median home price is about $400,000. That's why a lot of credit union members need all the help they can get to qualify for alternative mortgage programs.”

The fault however, is not entirely credit unions. Many members share a common misperception that they need perfect credit and a lot of money to buy a home, Nelson said. That's where first time homebuyer education comes in, he said. “We tell them everyone can qualify for a home. They may not qualify for a home loan now, but if we can show them how to work in a budget and straighten out their credit, then we can get them on the road to homeownership,” he explained. He continued, “A lot of members see ads for low interest rates, and when they don't qualify they get discouraged. Credit unions are still relatively new to mortgage lending, and a lot of them don't want to take the perceived risk of expanding their product line by going into non-prime products to serve these members.”

Florida Member's Mortgage has a full-time loan officer relationship with Indian River FCU, Vero Beach, Fla., and a part-time loan officer relationship with Sun CU in Hollywood that Nelson said is expected to become full-time in December.

The company closes about 20 loans a month for the two CUs. It also has referral relationships with Central Florida Educator' s FCU, Orlando, Campus USA CU, Gainesville and Tampa Postal FCU that involve taking loan applications from the CUs that fall outside their loan guidelines and finding loan investors willing to fund the loans. Lastly, Florida Member's Mortgage has education services relationships with Fairwinds CU, Orlando and City County CU, Margate. It designs first-time homebuyer material for them on a user license basis that the CUs can put on their Web site or distribute in their lobbies.

“We strongly believe a credit union should never have to say no to a mortgage loan request because the moment that happens it opens the member up to being served by noncredit union competition which in many cases doesn't give those members the best deal,” said Nelson.

That's why designing a first-time homebuyer manual and encouraging credit unions to offer a wider variety of mortgage products and services is so important to him.

“Many credit unions are missing the boat when it comes to mortgage lending because they don't have a lot of the products and services many first time homebuyers need,” Nelson explained.

Nelson insists there's such a thing as a solid, non-prime loan that doesn't meet conforming guidelines, but it still clearly has a good basis for being underwritten and approved.

According to Nelson, “Freddie Mac and Fannie Mae have placed more importance on consumers' credit scores and are placing less emphasis on things like loan-to-value and length of employment. A credit score is only one element of the underwriting process. When you talk about non-prime loans, you're taking a strong look at collateral, length of employment and the stability of the member's relationship with their credit union.”

Florida Member's Mortgage has relationships with six conforming lenders and about two-dozen non-conforming lenders.

Nelson said he intends to “continue to preach the gospel” of non-conforming loans to credit unions because they're so vital to CUs being able to respond to their members' mortgage needs.