LAS VEGAS — Last week's news ranking Nevada among the eight states in nation with the highest foreclosure rates has not fazed Community One Federal Credit Union's plans to offer an alternative for homeowners and shoppers.
The $161 million credit union is moving forward with its partnership with CUSO Development Company LLC to bring mortgage loans to its members. Founded in 2006, CDC (www.cusodevelopment.com) was formed to provide credit unions with real estate, mortgage and title insurance products to members and the general public. In addition to its mortgage subsidiary, the CUSO also launched a title insurance subsidiary in August and has plans to branch out into real estate in 2009.
"I think a lot of people have lost faith in banks," said David Fischer, vice president and chief financial officer of Community One, responding to the Nevada foreclosure ranking. "Credit unions have a lot of credibility as being member friendly. We have a good chance because we think there will be a shift coming from those people moving back into their homes."
On Nov. 1, Community One will turn over its entire $20 million mortgage operation to CDC, which will originate future loans and will be the property of the CUSO, Fischer said. The loans will be serviced by Midwest Loan Services Inc., a company that has worked with credit unions for more than 10 years, according to its Web site (www.membersforlife.com). A link on Community One's Web site will take members directly to CDC to start the origination process. The official debut is scheduled for Oct. 22 for members.
Fischer said the credit union will earn revenue through its investment in CDC as well as from dividends. Even more importantly, he added, Community One's mortgage portfolio transfer will free up expenses. In fact, the credit union's one loan officer is now an employee at CDC.
"We have the best of both worlds. We will no longer have the pressure of keeping up with mortgage regulations and we won't have to expand our staff," Fischer said.
Community One plans to stay local with its mortgages, specifically in Clark County. That's an important distinction given some credit unions that ran into troubles securing real estate out of their home states. Fischer said the credit union has been buffered by those woes because it never engaged in subprime or exotic mortgage loans.
Cory Mackwood, co-founder, CEO and president of CDC, said collaboration can help credit unions have a competitive advantage in the mortgage lending market. The CUSO aims to originate loans only in the areas it serves.
"The collaborative partnership allows credit unions of all sizes to gain efficiencies and reduce costs, allowing them to increase their market share when competing with larger banks and lenders," Mackwood said.
As the mortgage market continues to roil, many are looking for alternatives with refinancing and mortgage originations, Mackwood pointed out. At one time, credit unions were not on the short list but times have since changed, he added. He cautioned on being a free-for-all mortgage provider.
"The danger in the industry is taking just any loan. We have to be careful to do the ones we can do."
CDC currently has seven credit unions in its core ownership group including 1st Advantage FCU, Bellwether Community CU, Belvoir FCU, CommonWealth One FCU, Community One FCU, Sun East FCU and Workers' CU.
Community One is a class A investor, which means it has a voting interest in CDC and a seat on the board. Natural person credit unions here have assets ranging between $200 million and $2 billion. Mackwood said the CUSO will be adding a class C investor category for credit unions with up to $100 million in assets. They won't have a voting interest and their investment in CDC will be significantly lower, he added.
–msamaad@cutimes.com
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