LAS VEGAS — The word heard constantly around the American Credit Union Mortgage Association's Fall Conference here was "opportunity," as it pertains to credit unions being able to make hay of the housing downturn to boost its own market share of business.

From the first speaker's call to action to delivery on the last day of survey results about CU mortgage lending to the buzz at networking breaks and luncheons the prime directive came through: it's now or never for CUs to appeal for consumers' mortgage loans. Even Bob Dorsa, a longtime advocate for increased CU mortgage activity told the 200-plus attendees, "The people in this room can make credit union history. You are the choir and I won't preach to you, but while you're here I hope you'll be inspired to go back home and reach out to other credit unions in your area that don't do mortgages because that's what really has to happen for it to take off."

ACUMA Chairman John Reed noted that 52 of the top 300 CU mortgage producers were at the meeting, not including mortgage-related CUSOs, and there were 40 new attendees this year over last year, owing to interest in expanding mortgage lending. Those top CUs have made 22,000 loans for $4.8 billion, but that's only a good start, said Reed. "It's so important to grow mortgage lending so that we can in turn promote it to credit unions nationwide. To help do that, we've reached out to the National Association of Realtors and we will have a booth on the trade show floor and a credit union breakout session before attendees. Each year, the NAR draws as many as 40,000 real estate agents and this year may even exceed that number. If we can get the credit union option before so many agents that are often the first contact for

homeowners we can develop more relationships and make more loans."

The exponential leap required in CU mortgage loan numbers to allow the industry a rightful place as mainstream housing lenders is still far short of realization, but Reed and Dorsa firmly believe it can be done. It will just take a lot more CUs willing to step into the limelight recently vacated by so many other mortgage lenders, and CUs are not usually prone to seeking the limelight. Given the negative news on the mortgage horizon, the conservative bent of most CUs may give them pause, said Dorsa, but that hesitation will result in CUs losing the chance to show the difference between them and all other lenders.

"Stop hiding your light," Dorsa advised. "Credit unions didn't get upside this subprime mess, so you can proudly state that credit unions are the bastions of wise borrowing and smart lending. They didn't make no-doc loans; they didn't make speculative loans. A few may have made some poor choices and they'll likely suffer for that, but industry-wide, credit unions are well positioned to toot their own horns," he said.

James D. Jones of First Wellesley Consulting Group, Inc., Mass., told the audience that "Reduced market liquidity and a flight to safety has forced several competitors to leave the business, and credit unions can take up the slack." There will be as much as a 50% industry restructuring, said Jones, who delivered best practices insights for doing more business. "There are two units of safety: and they are credit unions and banks."

Ongoing legislative action around the mortgage business may bring licensing of loan officers because Rep. Barney Frank (D-Mass.) has said he wants a "level playing field" with brokers, banks and credit unions, Jones added. "That will mean a second look at credit unions as 'trusted advisors.' Credit unions can use that advantage to offset their low marketplace awareness overall," he said.

Another advantage is the large and loyal membership and the core dedication to member service. A bent to apply the latest technology faster then many others may also speed applications and approvals online, which will be key to helping members with resetting ARMs and gaining new business. Leveraging advanced technologies is the most important strategy CUs can adopt in the coming years, he said. Delivery of mortgages through all channels (Net, branch, call center, etc.) must complement each other and be equal. Making loan officers mobile is also important. Have laptop, close deal is how it will play out, and the

point of sale (POS) experience will determine what members decide to do.

Credit unions tend to keep mortgages in their portfolios or if they do sell them, sell to Fannie Mae and Freddie Mac, both pluses for the members. "A local decision process and local servicing will become more important again," as Wall Street's securitization of home loans picks up more detractors now that the housing bubble has burst. Jones predicted that Countrywide will be "consumed with internal stuff for at least a year."

The CU Mortgage Brand?

Over the summer ACUMA and MCorp, a strategic brand and marketing consultancy with offices in San Francisco and Portland embarked on a research project to answer key questions about CUs, mortgages, CU members and their preferences/beliefs compared with bank customers. They surveyed 800 people, half of who belonged to a credit union, the other half were bank customers. The sample was national and the data was projectable nationwide as well (as relevant in California as New York). The upshot was clearly that CUs could be doing much, much better at brand awareness, which leads to sales.

Given the weak performance of CU-friendly PSAs and regionally and individually-bought CU advertising and marketing, credit unions have no national recognition as either a movement or industry, no national spokesperson and no breakthrough symbolism that connects with American consumers, said ACUMA's Dorsa. "Where is the CU movement's AFLAC duck? Why can't CUs get over themselves and put an ad on the Super Bowl show? Just imagine the growth power contained in millions of people asking, 'Credit unions? Not-for-profit banks? I can be a member? Wow, where do I join?' if only CUs pooled the money to buy a 15-second ad. Do you think it would earn payback through increased membership, loans, credit cards and mortgages? You bet

it would."

MCorp's Michael Hinshaw helped shore up one aspect of that proposition. The CU member relationship lifecycle moves through a predictable series of stages from "awareness" to purchase and advocacy, he said. "I may be telling you something here that you've already figured out, but people can't buy something from you they don't know you sell." Hinshaw said the survey clearly showed that greater trust and loyalty leads to future revenue and profits. Members who finance homes through CUs cited CUs' as providers of full-service banking as an identifying statement about CUs in general. And they give CUs a greater share of wallet (more product line relationships) despite the fact that most CU members have (on average) 1.3 relationships with other providers.

They also have much longer relationships, said Hinshaw, with 49% of respondents reporting at the 10-year plus level. "And credit unions just crush banks on overall loyalty at 61% versus 22%. You guys just kill the banks, so the bottom line is that more members will turn to you for more products."

Sell or No Sell

But when it comes to selling mortgages banks do a far superior job. "Only 15.3% of members have a mortgage at the credit union, while banks get 21.2% of their customers' mortgage business," Hinshaw said. "You guys should be doing better. Trust wins, and credit unions should be able to pick up bank customers' mortgage business.

"When it comes to finding a mortgage provider, even CU members believe it to be a 'commodity' and it's always best to shop around. "And credit unions' should encourage them to do so. But then the trust factor kicks in as they research about deals and all other things being equal, you'll get the business."

The right strategies for getting that business include doing a better job of awareness and the marketing/selling of mortgages; a means to measure and improve existing market penetration of member households; moving members from the loyalty position to advocacy by sending the right message to the right people through segmentation and giving incentives for improvements in service.

"Banks would kill for the loyalty position credit unions have," said Hinshaw.

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