Credit Union Magazine - January 2009 - (Page 46)

TOOLS OF THE TRADE Instead of taking blows, vendors say CUs’ mortgage outlook is rosy in certain areas. CUs Survive Mortgage ‘Mugging’ Patrick Totty You might compare what’s happened to the mortgage market recently to being mugged. First, there’s a flurry of blows, followed by sitting down, taking stock: Should I get up or catch my breath? For most credit unions, the “mugging” has inflicted light damage. Most avoided subprime mortgages and kept sensible lending standards. In fact, 2008 may be “the biggest mortgage year in credit union history,” says Dan Green, executive vice president of strategy at Prime Alliance Inc., Tukwila, Wash. “It wasn’t just refinancings. We saw a lot of first mortgages, the result of a change in perception of credit unions as not only refinancing sources but first mortgage lenders. “There probably will be a slowdown in 2009,” he continues. “But credit unions remain portfolio lenders. They didn’t get into exotic subprime mortgages. Still, they occasionally must sell mortgages, and they may find the market tight from underwriting and pricing standpoints.” If credit unions don’t have their own delivery channels or access to secondary markets, “they should affiliate with a 46 CREDIT UNION credit union service organization like ours to offer a diversified product line to their members,” says David Constantino, president/CEO of Patrion Mortgage, Riverside, Calif. “There’s a lot of home buying activity now as a result of escalating foreclosures. This is where credit unions can take advantage of portfolio lending strategies that will strengthen their outreach to home buyers.” CUs focus on quality Credit unions are focusing on building stable mortgage portfolios, Constantino says. “Credit unions are comfortable with growing at a slower, more traditional pace. That means focusing on first mortgages because secuJANUARY 2009 ond mortgage and home equity loan business has been [hurt] due to the loss of equity.” Green predicts lenders in certain parts of the country will find mortgage success this year as housing prices bottom out. “This will be particularly true in areas that didn’t rapidly appreciate and, therefore, didn’t rapidly depreciate.” Barry Malone, vice president of sales at FICS, Addison, Texas, says he was more optimistic about the credit union mortgage market last fall. “Many of our clients were the beneficiaries of borrowers looking for funding. Some had doubled their mortgage business.” That situation, he says, mostly was the result of less competition as bigger mortgage lenders left the picture. “But during the past couple of months, with the economic meltdown and falling consumer confidence, more credit unions are doing just average mortgage business. The decline isn’t a result of bad lending practices but because of falling housing prices. In Las Vegas, for example, hous- es that sold for $800,000 now sell for $400,000 or $500,000.” FHA loans shine Malone says the mortgage industry is creating new guidelines—and returning to some old practices, such as not approving loans exceeding 90% loan-to-value. One bright spot: the Federal Housing Authority (FHA) loan. “FHA loans are the original affordable mortgage product,” says Green. “The loans certainly have come a long way. FHA loans made up 4% to 5% of all first mortgages in 2005. As of July 2008, that figure was 23%. They fit in nicely with a first-time homeowner strategy.” He says companies like Prime Alliance can help credit unions get some of that business. “You have to protect your member base. If members have to go to Wells Fargo for mortgages, you may lose them.” Also, mortgage availability is a recruiting tool, Green continues. “Offering good loans is a perfect strategy to attract younger members with whom you can build lifelong relationships.” There’s still the matter of mortgage technology. What services and guarantees should credit unions look for? u Make sure a vendor MAGAZINE ucuna.org http://www.cuna.org

Table of Contents Feed for the Digital Edition of Credit Union Magazine - January 2009

Credit Union Magazine - January 2009 Contents On My Way Leading Edge Spotlight President's Perspective Game Plan Washington Insider Wright Stuff Executive Suite Reverse Mortgages Come of Age Six Merger Myths Leading-Edge Lenders TwentyFour/Seven Bankruptcy Compliance Tools of the Trade Trendlines Rates & Ratios Council Corner Shoptalk System Scan Marketplace Branching Out Advertiser Index

Credit Union Magazine - January 2009

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