U.S. Central Rebrands NLAC as Charlie Mac to Reflect its Triple Purpose

LENEXA, Kan. – Move over Freddie there’s a new Mac in town. Charlie Mac is the new name of Network Liquidity Acceptance Company, LLC, a U.S. Central subsidiary that works through corporates to purchase credit union loans. Charlie Mac was started in 1998 during a time of tight liquidity in the credit union industry. Its goal was to help credit unions free up some cash by purchasing credit union loans. That still is a Charlie Mac goal, but not its only one. “We changed our name because NLAC was first launched as a liquidity tool. It’s evolved to be a secondary market investor, helping credit unions with not just liquidity risk, but credit and interest rate risk,” said Karen Pease, Charlie Mac’s Managing Director. As credit unions have become bigger players in mortgages, there are concerns of interest rate risk if rates should rise after the long period of low rates. Credit unions can rid itself of some of that risk by selling off mortgages to Charlie Mac. Since it was formed, Charlie Mac has purchased $700 million in credit union loans. Though approximately $500 million were in auto loans, mortgage loan purchases have come on strong in just the last year with the launch of its jumbo loan program, now known as JumboExpress. Under this program, Charlie Mac can purchase jumbo credit union mortgages (defined as $322,700 and above), something Fannie Mae and Freddie Mac don’t do. Charlie Mac has purchased $200 million in jumbos to date. When Charlie Mac purchases loans they are immediately sold to U.S. Central. U.S. Central has so far kept the loans, but Pease said the next step is to package the loans, securitize them and sell them in the capital markets. For now, Charlie Mac only wants to do this with its jumbos. Pease said it needs to reach $300 million in volume before it makes the first securitization. She hopes that over time investors will recognize the value of credit union loans, resulting in better returns for credit unions. “We want to prove to the capital markets that credit union loans do perform better than the industry, and in turn we hope to receive better pricing that we can pass down to credit unions so they can become more competitive on rates,” said Pease. The obvious similarities between the name Charlie Mac and Freddie Mac or Fannie Mae were by design said Pease. She said Charlie Mac will be more easily recognized as a secondary market investor. The name was created in-house, said Pease, who noted that they do hear some friendly ribbing from the two GSEs about the name. The new tag line for Charlie Mac is “Credit Union Lending Member Connection.” Fannie, Freddie and Charlie Charlie Mac is pretty much in line with Freddie and Fannie in terms of what loans they will purchase. “If they’re approved for Fannie and Freddie, it’s going to be easy to be approved by us,” said Pease, noting that CUs can use Fannie’s Desktop Underwriter or Freddie’s Loan Prospector to see if Charlie Mac would purchase loans. The only thing different is going to be the loan size, since Charlie Mac purchases jumbos. In another move to bolster its jumbo loan program, Charlie Mac has hooked up with Boeing Employees’ CU’s mortgage CUSO, Prime Alliance, as its jumbo mortgage investor solution. There is now a Charlie Mac loan approval function built into the popular Prime Alliance system. Loans submitted through Prime Alliance are underwritten by Fannie Mae’s Desktop Underwriter for conforming loan approval. Prime Alliance has added some additional fields to approve jumbo loans for Charlie Mac. Right now Pease said Charlie Mac has a lot of spending power, about $1 billion, at its disposal, so volume won’t be a problem. Of course it could always raise money through U.S. Central via corporates. Though the jumbo mortgage program has picked up steam, Pease said auto loans are still flowing in. “I think it’s going to be pretty even. Recently we’ve seen a lot of activity in indirect lending, primarily used vehicles,” she said. One of the most recent Charlie Mac deals was done with Gateway Metro CU through its home state corporate, Missouri Corporate CU. Gateway sold a $10 million pool of auto loans to Charlie Mac. Dennis DeGroodt, president/CEO of Missouri Corporate, said this is just one more tool for corporates to help their members. He said the role of the corporate is really only to market Charlie Mac, which was a perfect fit for Gateway. “Gateway Metro has a very successful indirect lending program and in order to help their liquidity situation and to balance interest rate risk, they wanted to sell some loans off,” said DeGroodt, who noted the deal was good for all parties because Gateway was happy to find a solution, the corporate was able to steer them to it, and Charlie Mac made the purchase. For any purchase, Charlie Mac must first do due diligence on the credit union. Credit unions that may not be ready to sell loans to Charlie Mac, can still lay the groundwork by going through the due diligence process. This will likely save them a few weeks once they want to do a deal. DeGroodt said Missouri Corporate has been marketing this product more heavily in recent months but because of all the liquidity out there, it’s been a tough sell. That may start to change, he said. “There’s been some tightening of liquidity. I just hope credit unions don’t wait too long. They can use the time now to put the pieces in place to make deals with Charlie Mac down the line,” said DeGroodt. Interestingly Pease said recently a billion dollar credit union, that previously did not deal with corporates, joined a corporate so it could take advantage of JumboExpress. Pease said Charlie Mac is working on an initiative that will be able to approve credit unions online as qualified sellers to Charlie Mac. It should be available next year. [email protected]