PHILLIPSBURG, N.J. – Lower mortgage rates might be good news for consumers, but small credit unions that don't offer first mortgages are meeting the news with grimaces. It wasn't the loss of first mortgage business that had Susan Rodriguez, CEO of $23 million Baker FCU worried, it was the first mortgage debt consolidation refinance loans members were closing at other financials and using to pay off their outstanding CU loans, that Rodriguez was concerned about. Rodriguez admitted Baker FCU has lost some of its members' business by not offering mortgages. The credit union has a $12 million loan portfolio and about 60% of that is in home equity loans. Every time a member inquired about taking out a first mortgage with the credit union which is located in Northern New Jersey on the Pennsylvania border, Rodriguez wound up directing them to a local bank. This bothered her, she said because, "once the bank gets them in with a mortgage product, they cross-sell them other services." Still, she felt she had little choice. "There are two other credit unions in our area, IRCO Community Credit Union and Riegel FCU, and neither of them offer first mortgages," said Rodriguez. "Besides, even if they did, I didn't know if any of our members were eligible to join those credit unions." Offering a first mortgage product in-house was out of the question for Baker. For a credit union the size of Baker FCU – the CU has about 3,200 members – Rodriguez said offering first mortgages would have put too much staffing burdens on the small credit union. As things stand now, the credit union has one loan officer who handles all the various types of loans and credit offerings the credit union provides, such as auto, credit card and home equity. Even though Baker offers home equity loans, the credit union still found it difficult to compete with the home equity loans being offered by banks that members had their first mortgages with. "Since we have no costs involved with closing our home equity loans, our rates are not as good as a 30-year fixed home equity loan a member could get from a bank," said Rodriguez. "A lot of members, like most consumers these days, are on a refinance bandwagon, but they're not aware of the costs involved. They need to stop and ask themselves if it pays for them to refinance their mortgage, before they do anything," said Rodriguez. Baker FCU recently began working with America's Mortgage Company, a d/b/a of Wells Fargo Home Mortgage and using the company's Member Penetration Program as a way to offer the CU's members first mortgages. According to the terms of their arrangement, Baker FCU takes the members' loan application so the CU can remain the primary contact with the members. AMC fields members' questions, takes and processes the loan applications for Baker FCU and underwrites them. AMC also keeps the loans on its books. AMC's Laura Enock said the Member Penetration Program is "geared to small credit unions that don't want the work or risk involved with first mortgages." Just a few weeks into the program Rodriguez said, "This is a new process for us, but we realize we have to do this to retain our membership base and familiarity with our members." As for members refinancing credit union loans through banks, Rodriguez said, "Some members who aren't aware of the costs involved with refinancing are getting shell-shocked when they find out. Members need to get all the facts and information and weigh the issues before they make their refinancing decisions." -

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