Air Academy FCU's Secret to Successful Mortgage Strategy: Commitment and Perseverance

COLORADO SPRINGS, Colo. – Glenn Strebe has watched this city in central Colorado ride out the ups and downs of the mortgage market and the local economy. The president/CEO of Air Academy FCU chalks it all up to what he says is key to a successful mortgage program: you have to know your market. During the late 1980′s, Colorado Springs had the dubious distinction of being known as the foreclosure capital of the U.S. The mortgage market picked up again in the early and mid-1990s when several high tech companies such as MCI and a large, religion-based organization called “Focus on the Family” opened offices in the city and brought with them employees who needed homes. Over the past couple of years, Colorado Springs has enjoyed the same up tick in mortgage activity enjoyed throughout the U.S. because of record-low mortgage rates. Now though with the city facing an unemployment rate of 6.0%, the mortgage market again is cooling down. But if it’s true that timing is everything, as the saying goes, then Air Academy got into mortgage lending at the right time. The $239-million credit union began offering mortgages in late 1997 when the market was good. Unfortunately the CU’s program got off to a rocky start, and it suffered about $600,000 in losses. Strebe attributed the “false start” to a wrong focus of the program that emphasized “100% external relationships with non-members.” When Strebe became president in 1998 – he was previously the CU’s COO and prior to that its COO – he completely restructured the mortgage program. “I told the staff if we wanted to offer mortgage lending, then we needed to do it the right way,” he says. The first thing Strebe did was hire people who had strong mortgage backgrounds and “could run the program like a mortgage company, not just a department.” That means, says Strebe, “being able to lay off people in downturns and enticing them with bonuses and perks when times are good.” Air Academy’s mortgage “department” is currently staffed by 28 people, but at times it’s only had 15 people working there. Regardless of how large the staff of the mortgage department is, Strebe requires them to have worked in the mortgage industry or with local or nationwide mortgage companies. He describes them as being “career mortgage people.” To further shore up Air Academy’s mortgage lending services, the credit union has focused on building relations with local realtors and gaining their confidence to be able to deliver them referrals both from members and non-members. Strebe says it’s crucial to be able to deliver both to realtors. Air Academy’s wholly-owned CUSO, Air Academy Service Corp., handles non-member mortgages. The funding of non-members’ mortgages is done in the subsidiary’s name. Technology plays a big part in Air Academy’s mortgage services. Strebe says the credit union tries to automate as much of the mortgage process as possible. Members can apply for loans online and get their loan decision back “almost instantaneously,” said Strebe. Appraisals can also be submitted electronically. With a quarter of its membership living outside the state of Colorado and a third of the CU’s members in the Air Force – AAFCU’s FOM also includes 105 select employee groups and nine school districts – members’ ability to apply for mortgages online through the CU’s Web site that links to its origination software, Calyx Point, is crucial, says Strebe. Educating members and non-members about the home buying process is also important to Air Academy. The credit union regularly holds home buyers seminars, and the mortgage lending staff typically take applicants through a gamut of questions that help the staffer guide the applicant to the most appropriate loan and assists them with structuring their mortgage. “We’ll always take an education approach to our members to help them through the home buying process,” says Strebe. “We consider it value added.” Air Academy’s strategy has paid off. Last year, the credit union originated 1,200 loans worth $187.7 million, and during the past two years, it processed a 32.8% increase in mortgage loans. In the first quarter 2003 it originated $60 million in mortgage loans. In 2001 and 2002, Air Academy was ranked number one by Callahan & Associates for credit unions in the $100-$250 million asset category in first mortgage originations “Buying a home is the biggest investment most members are ever going to make, so it has a high impact on their lives. Mortgage lending is a great way to shore up relationships with members and potential members,” he says. His response to those credit unions who have shied away from offering the product because of its perceived difficulty? “Mortgage lending is only as difficult as you make it. There are plenty of mortgage models out there and resources to use and draw from,” Strebe says. In addition to mortgage loans, Air Academy also provides lot and construction loans. “It’s a long term relationship,” he says. Strebe admits that sometimes the credit union has had to let certain loans go “because people try to chisel us out of money,” he says. “We’ll skinny down where and when it’s appropriate, but we’re not going to give the world away,” he said. The credit union is currently offering 10-year mortgages at a 4.25-4.125% with a $99 closing fee, and a 15-year loan at 4.50% with a $499 closing fee. It sells most of its long term loans on the secondary market but retains 10-15 year mortgages in its portfolio. With the mortgage market in Colorado softening, Strebe is readying to face a softer market than he’s dealt with in awhile. But he takes it all in stride. “Every market is unique. It has its ebbs and flows. You just have to know how to deal with it,” he says. -