PASADENA, Calif. — Wescom Credit Union and CUSO Mortgage Inc. have had a relationship for the last two years, but now they've gone a step further.

The $3.6 billion Wescom acquired CUSO Mortgage, a leading provider of mortgage services for credit unions for more than 20 years, effective Oct. 1.

CUSO Mortgage will operate as a wholly-owned subsidiary of Wescom and will continue to do business under its own name. Jamey Cohen, president/CEO of the company, will continue in that position.

Founded approximately 20 years ago as CUSO Mortgage, the company was never owned by a credit union, but CUs have always been the company's entire client base. Several years ago when the mortgage division of Royal Bank of Canada acquired CUSO Mortgage its name was changed to RBC Mortgage.

In 2004, Royal Bank of Canada consolidated several of their mortgage divisions and decided to spin off the credit union division. Cohen acquired the company and has run it as an independent company since then. He also reverted the name back to CUSO Mortgage. The company currently services 80 CUs and approximately two million members.

Also in 2004, CUSO Mortgage-client Unical Federal Credit Union merged with Wescom. While Wescom had only previously been doing real estate loans for members in Southern California, it found itself doing mortgages for members outside the state since Unical's field of membership was nationwide for the employees of Unical Aviation.

When Wescom determined Unical FCU's members were satisfied with the service they were getting from CUSO Mortgage, Wescom decided to continue its relationship with the mortgage services providers for members who live outside California. That arrangement continues, even though Wescom President/CEO Darren Williams said the majority of the CU's mortgage portfolio–about $1.5 billion in outstanding balances–is derived mostly from Southern California.

“For us at Wescom, for the last several years we've been increasingly developing relationships with other credit unions and providing them services through wholly-owned CUSOs such as Wescom Resources Group, Wescom Financial Services and Wescom Insurance Services. We like the model of credit unions providing business-to-business services to other credit unions rather than credit unions going outside the industry. We've been very pleased with the quality of service we've been getting from CUSO Mortgage, and it seemed like a natural fit to extend that model to mortgage services,” Williams explained.

Williams said the timing of the credit union's acquisition of CUSO Mortgage along with the CU's decision in August to pull the plug on a deal with Silvergate Capital to purchase the company's industrial loan corporation and use it to buy credit union credit card portfolios “is merely coincidental. Our decision to withdraw our ILC application was designed to address the credit card portfolio acquisition.”

He added, “Both deals fit into our long-term strategy of building on our credit union business-to-business model. That model makes sense for Wescom and for the credit union industry because credit unions should be less dependent on bank-owned servicers whether it be for credit cards, technology or anything else.”

According to Williams, CUSO Mortgage's production level is about the same as Wescom in total mortgage loans funded. It funded about $600 million in mortgage loans over the last 12 months.

“So we'll double our volume as a result of the acquisition, which translates into greater efficiency for us and them,” he said.

Cohen agreed, “By joining forces, CUSO Mortgage and Wescom intend to strengthen the important business of assisting credit unions nationwide with mortgage originations.”

Williams pointed out that Wescom and CUSO Mortgage use the same front-end automation system as well as the same servicing system. So a lot of back office integration will drive efficiency, he said.

Greater efficiency means Wescom and CUSO Mortgage will be able to introduce new products for members like reverse mortgages. He said Wescom has considered offering the product in the past and knew it needed to be in that market.

“But we thought we didn't have enough demand from our members to make that viable. Now with the other credit unions that are CUSO Mortgage clients, there may be sufficient volume to invest in products and expertise in that area,” said Williams.

While the Silvergate ILC deal is dead, Williams said Wescom “is still interested in offering credit unions an alternative to credit card portfolio sales. We're committed to that.”

He emphasized though that there's “nothing specific” in the works currently, but “it's still high on our list of priorities. I believe we'll have a viable alternative soon to offer credit unions.”

– egbarr06@bellsouth.net

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Wescom CU Acquires CUSO Mortgage Inc., Acquisition Doubles Wescom's Mortgage Volume

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