Fall. Time for football, cooler temperatures and budgeting and planning at the nation's credit unions. And all of those credit union executives wrestling with that planning need to take into account the challenges and opportunities posed by mortgage lending. Because these decisions will be among those that will shape your credit union's future.
First, at a time when every credit union's balance sheet has taken a hit, mortgage loans provide a way your credit union can significantly improve its bottom line. (The underlying sentiment here is offering appropriate loans, underwritten well and priced accordingly.)
Properly priced and underwritten mortgage loans will do wonders for your balance sheet. Your loan-to-share ratio will be enhanced and your profitability should soar under the current and projected market conditions. Mortgage lending solves many growth issues. For example, credit unions can use mortgages to engage first-time homebuyers, at a time when almost all credit unions are looking to woo younger members. This will help your organization for many years. You will also have a great opportunity to cross sell other products and services since your mortgage applicant will be working with you for several weeks during this transaction. All of these elements offer the potential to strengthen your credit union in several key areas.
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Next offering mortgage lending will sharply enhance your image in your community or industry segment and raise your credit union's profile. As little as four or five years ago, your mortgage offerings may not even have been noticed because there were so many lenders in the robust market. Homebuyers had many choices, and it was very difficult for credit unions to break-in. But the housing bust suffered during the past two years has changed all that. Trust in a financial institution used to be a merely a catch phrase, now it is very important to homebuyers and real estate professionals, which brings me to my next point.
For the most part, credit unions have avoided establishing a national connection with professional Realtors. While many Realtors are credit union members, even these folks are unaware of the potential of our industry. Once again, the opportunity is to establish your credit union as a community leader in home lending and assist homeowners acquire their first home or the home of their dreams. Continuing low mortgage rates and a renewed focus on world-class service and trust in a lender are the catalyst for this tremendous new opportunity.
Credit unions have spent decades building a 20% market share in automobile financing but only now possess a 5% market share in first-mortgage lending. This disparity has to change or, in my opinion, credit unions will be unable to sustain their operations in the competitive environment of the future. Mortgage lending, performed well, will produce generous spreads and allow more opportunities to focus on the needs of our members, which should be our primary business focus anyway. These strategies and tactics are not easy. They require careful planning and even better execution. But the good news is there are many trustworthy and reliable resources to guide credit unions along the way. Frankly, I do not understand why any credit union believes it can stay away from mortgage lending any longer.
I suspect many at this point are thinking, "We just don't know where to begin" or even, "We just can't do this." I contend you can. There are more resources than you know. We here at the American Credit Union Mortgage Association have spent 14 years developing a skilled professional network to assist all credit unions start or build their mortgage lending programs.
I can tell you that not responding to your members needs is a recipe for failure, and I believe the failure to offer more mortgage loans has already cost our system billions of dollars in growth. The fact is most consumers and real estate professionals do not know we exist or do not see credit unions as viable mortgage lenders. This must change and now is the time for that change.
Let's face it, the bubble has burst. There is little room for home values to fall further and the outlook is for a slow and steady rebound in future home values. Yes, there is risk; I am not trying to say this is a sure thing. But I strongly feel doing nothing now may lead to the end of your credit union's business lifeblood.
Robert Dorsa is president of the American Credit Union Mortgage Association. He can be reached at 877-442-2862 or at [email protected]
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