SAN DIEGO — What goes up must come down and bubbles filled with hot air go 'pfffttt' eventually. That expresses the 'been there, seen that before,' philosophy expressed by Scott Norris, SVP of Real Estate at San Diego County Credit Union (www.sdccu.com) here. "I've been around for thirty years and we've been through boom and bust before," he said.
Watching the boom at its peak in 2005, when the local real estate market was gangbusters, Norris said the CU resisted the temptation to push the lending envelope, write exotic mortgages or delve into the ripening subprime market, make no-or-low-documentation mortgages. Instead, the CU tightened credit standards for home loans. As a result, SDCCU is sitting on a single REO and for the first time in 10 years has declared one basis point in charge offs on real estate loans. That's not bad for the credit union with the largest market share of mortgages among CUs in San Diego County, a singularly competitive town, offered Norris.
"We do make 100% loan to value mortgages but they require insurance," he said. "And we're having a big year for purchase loans because members who could not afford to buy homes here for the last two years now can do so (as home prices have declined). We get them pre-approved and they have lots of time to go house
shopping. Our credit committee is really good, we've followed the trends and made a committee decision."
Staying true to provident lending principles while other lenders were losing sight of common sense is just part of what a credit union is all about, said Norris, and it's the reason that CUs may be in a position to gain from the crisis. "There are 141 mortgage companies that have gone out of business and people need somewhere to go. We're trying to help members who got second loans elsewhere that are now resetting by forcing the subordinate financing wherever we can. If, two years ago, they bought a first at 80% loan to value and a second at 20% loan to value and now have to refinance we'll try to pay off the first by subordinating the debt. If we can help some of these people we'll try everything we can. We can be flexible. I find that if we do that, members appreciate it. They're making payments. The last thing we ever want to do is take away a home from a member."
The make up of SDCCU's real estate portfolio includes more than 16,000 first mortgage, equity lines and loans that total $2.1 billion. The 60-plus-day delinquency is .20% and real estate charge offs through June 30th are .00%. Anticipated charge offs this year are set at .01%. "Approximately 2% of our portfolio is considered 'non-traditional' loans, said Norris. "Prudent underwriting always pays
off," he said.
"We'll likely see more REOs next year, so maybe our charge offs will be in the 2-3 bp area, and there may be a slightly higher delinquency level," said Norris. But that's a far cry from the high default and foreclosure levels other lenders are experiencing.
"I got the biggest kick when I read Anthony Mozillo's (Countrywide chairman) statement about the need to tighten credit standards for home loans. I mean, he's just now figuring out it's time to do that? I was horrified," Norris said. (Countrywide is realizing high default rates and its stock price is faltering; Mozillo is also under fire for selling his personal stock and making millions in profits.)
"I see this as a real opportunity, for credit unions," Norris said.
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