While 2003 was the most productive year in the history of mortgage lending volume, 2004 may be an even better year for credit unions to grow their mortgage business. There are many elements that are aligning to make this an ideal environment for credit unions to take either a bigger step, or that first step, into mortgage lending. Now is the perfect time to grow your mortgage business, because: * Continued low interest rates – The trend continues from 2003 with rates still at or near-historic lows. * Accelerated job growth – Recent Federal Bureau of Labor Statistics data indicates 308,000 new jobs were created in March. That is the largest monthly increase in more than four years. With more people working, there are more opportunities for homebuyers. * Strong consumer confidence – In January, the Consumer Confidence Index surged to its highest level since July 2002. Since January, consumers' confidence has remained steady, indicating there's optimism about the overall health of the economy. * Start of typical home buying season – Spring and summer signal the home-buying season when families begin to relocate before the fall start of school. The National Association of Realtors (NAR) projects 1.4 million new homes will be built in 2004, with 1 million of them sold this year. NAR also predicts 5.66 million existing homes will be sold this year, which is just under last year's record total. * Stock market continues to climb – The Dow Jones Industrial Average has gained almost 1,000 points since November and has consistently been around the 10,500 mark, or above, since January. The Dow was below 8,200 one year ago. All of these factors signal a great opportunity for credit unions to bolster their mortgage lending programs, but you need to be able to act now, versus reacting later. The good news about the economy could actually portend the end of low interest rates. The increased demand for housing and the availability of purchase money may exert pressure on the Federal Reserve to send rates upward four to five months from now, due to an improving economy. The mortgage origination market does best during a weak economy or in a newly recovering one, and since we are trending toward a stronger economy, the Fed may raise rates by the end of summer. It's a cruel irony that when people begin to feel good about their financial health, interest rates go up. Credit unions need to make their mortgage operations run as cost effectively as possible. Look for ways to partner with peers or with vendors to take advantage of economies of scale that can be achieved by leveraging large volumes of business. As I suggested a year ago in this space (CU Times, May 28, 2003), credit unions need to be attentive to the unique needs of first-time homebuyers. Members need to know you are in the mortgage business long before they decide it's time for that first home. Consider hosting home-buying seminars or offering credit education seminars to help better prepare members for the home-buying journey. One of the unique tasks for first-time home buyers is to find a program that fits, not only their financial situation, but also their housing needs. Over the years, many first-time homebuyers have had to settle for much less, because their financial institution was stuck in the mindset that if they couldn't fit into a conventional 15-20-30 year loan, then they weren't mortgage material. Today, nothing could be farther from the truth. Presently, there are plenty of opportunities to put many non-traditional homebuyers into affordable homes. Credit unions need to be creative in their mortgage product offerings and utilize the flexibility that mortgage insurance offers. For members who have yet to establish a credit history (i.e. recent college graduates), but have the financial means to easily afford monthly payments, there are product offerings such as Affordable Gold products. There are currently low-down-payment mortgage products available that, once again, target those with the financial means, but who do not have the thousands of dollars necessary for the downpayment and closing costs. Products such as a 100% LTV, Alt 97 and Affordable Gold 97 can accommodate this kind of member. Another non-traditional home buyer who has the ways and means to own a home is the self-employed business person, who may not have all the standard income documentation available. Programs like a No Income/No Asset, No Ratio or Stated Income would handle a situation like this. The American Dream is becoming reality to more and more people thanks to recent government programs and legislation, such as the FHA's No Down Payment program for first-time homebuyers that could open doors for more than 150,000 people each year. Credit unions need to effectively deliver their mortgage message to members. During the past two years, marketing your mortgage program meant making sure the doors to your credit union were open and you had a telephone at your desk. Business came looking for you. However, those days are gone. In today's environment you must market your mortgage program. It's astonishing that less than 10 percent of credit union members who have mortgages have them at their credit union. Many members say they didn't even know their credit union offered mortgages. Take every opportunity to enlighten them. Have information available at your counters, on your Web site, in your mailings. In addition, if you use radio, TV or newspaper advertising, be sure to plug your low rates, fast turnaround and friendly service. Whatever you do, don't miss the chance, because you may not get a second one. Remember that the biggest purchase a consumer makes in his/her lifetime is a home. It's not a decision made hastily. Much thought goes into finding the perfect and affordable house to meet their needs, then arranging the financing. Research indicates the consumer views the financial institution that has their mortgage as their personal financial institution (PFI). In other words, there is a comfort level and trust established between the two of you during this long-term partnership, which very well could last a lifetime. As such, they are much more likely to need and buy other financial products and services from you. True, the mortgage business is a revenue generator, but it is also a commitment to your member that you are there for them, no matter what financial situation may arise. If they take their mortgage business elsewhere, they may take everything else with it. Work hard so that doesn't happen.