AUSTIN, Texas -- Janet Walter, CU Members Mortgage vice president of public affairs, was pleased to note that even in down times for other lenders, credit unions are picking up steam in the mortgage area.

The CU Members Mortgage Conference, its twelfth annual, recently drew mortgage-lending professionals from credit unions nationwide and "took place at an ideal time for credit unions," she said.

CU Members Mortgage provides mortgage services to more than 850 credit unions, CUSOs, and leagues nationwide and is one of the largest servicers of mortgage loans in the United States. The company originates more than $3 billion in FHA, VA, conventional and unique single close construction loans annually. It has a portfolio of $12.5 billion. Walters noted that advanced technology and an easy online mortgage application capable of delivering a firm decision in minutes help account for the CUs success.

Conference Highlights

CU Members Mortgage Vice President Linda Clampitt's presentation on the positives of credit unions involved in mortgages right now. A market shift is slowly occurring, with the 2% market share traditionally held by credit unions now growing, Clampitt said. Credit union members who have a mortgage with their credit union have four to six other products with the credit union, she said, so, "Now is the time to make mortgages a core product."

David Motley, president CU Members Mortgage, reviewed the current industry landscape, and the housing correction. Motley said with brokers and members trusting their credit unions, it's a great time to be in the mortgage lending industry.

With 12,000 to 15,000 people becoming eligible for reverse mortgages every day, it's important for credit unions to be aware of this product and start accommodating members who are looking for it, according to Andy Berry. Berry, a reverse mortgage specialist, explained that baby boomers are now becoming eligible for this product. (To qualify, a member must be at least 62 years of age.) There are now 12,000-15,000 people becoming eligible for reverse mortgages every day, so it's important for CUs to accommodate members who are looking for one. A reverse mortgage gives members a tax-free disbursement of equity every month. There are no restriction on how members can use the funds, and payments members receive will not affect their Social Security, Medicare or Medicaid benefits.

CU Members Mortgage will begin an advisory program on reverse mortgages in April to help credit unions learn more about this product. It's an in-depth product with a great need for patience, as the average loan processing time, from application to closing, is four months, said Berry.

FBI agent Evan Rae highlighted the gradual increase in mortgage fraud since 2003. The knowledge and intent to commit fraud is a state of mind, she said, and as such, has become more difficult to prove. Fraud for profit is the motive, and mortgage fraud is typically linked with other fraud and is affected by demand, home prices and identity theft.

Charles R. Idol from the Southwest CUNA Management School, projected that the economy will slow down in 2008 and suggested an asset- liability Management policy for credit unions:

No more than 250% of equity capital should be held in the aggregate sum of long-term (over five years) real estate loans and complex investments. (Not needed for CUs doing NEV or asset valuation.)

No more than 100% of equity capital should be held in first-mortgage loans that do not conform to secondary market underwriting standards.

CUs should limit the sum of their holdings of non-first mortgage loans (regardless of type and including home equity loans) and unfunded commitments for open-ended lines of credit secured by one- to four-family residential properties to no more than 150% of equity capital.

CUs should limit holdings of first-mortgage loans to no more than 300% of equity capital.

Whenever the liquidity ratio exceeds 95%, the ALCO should adopt a plan that encompasses one or more of the following liquidity-enhancing activities: sell either new first-mortgage originations or existing first-mortgage loans in the secondary market; use matched-duration borrowings to fund real estate lending activities; or temporarily limit originations of new first-mortgage loans.

Bill Walker, director of national sales at CUNA Mutual Group Mortgage Insurance, discussed real estate risk and managing strategies. He stressed the difference between credit unions, which are 100% insider owned, and banks, where less than 5% is insider owned. Walker encouraged credit unions to define their own risk tolerance and be pliable so that they can change with the market. He admonished credit unions not to do one thing and stick to it because it's the way they've always done it that way, but instead, to embrace change as necessary.

To move forward in the current environment, credit unions will need to balance portfolio products, develop secondary marketing strategies, look at risks, manage liquidity and, ultimately, serve the member's needs. Walker also explained the need for credit unions to find partners that are willing to take on the risks they are unwilling to swallow.

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