Member Gateways Celebrates Fifth Anniversary With CUs in the Wings Ready to Sign Up

SOUTH BEND, Ind. – When it was formed in January 1999, the idea was to leverage the scale of its founding 14 credit unions and Callahan & Associates to do research and development on different business models and form strategic partnerships with companies that could provide credit unions with best of breed solutions. Five years later, Member Gateways, LLC now has 22 credit union partners, plus Callahan & Associates, and there are several CUs queued up ready to start up with the company. Vic Pantea, Member Gateway’s President/CEO prefers to refer to Member Gateways as a “networked new product incubator.” The average size of the CUSO’s partners is around $1.5 billion and their headquarters are geographically dispersed. “By leveraging their scale, working collaboratively and sharing the risk, we can better participate in new product development and identify opportunities for credit unions,” he says. One of Member Gateways’ first relationships was with credit union broker/dealer CUSO Financial Services LP. That was in 1999, and Members Gateways became one of first investors in CFS. In 2000, it did the same with Experion Systems. Last year, Member Gateways sealed its relationship with CU Realty, Scottsdale, Ariz., which was founded by Mike Corn and Craig Davis in the late 1990s. Member Gateways currently is a 30% part-owner of the company. Corn who is currently CU Realty’s president, said Member Gateways will eventually own 75% of the company. Davis is COO of CU Realty. Corn explained that when he and Davis founded the company, they had in mind doing online real estate brokerage. Not far along though they decided not to market to the Web-based retail industry, but to focus on teaming up with one specific channel. The two of them researched who would be “a good partner” and that turned out to be credit unions. In January 2001, it began doing business with its first CU – Deer Valley CU, Phoenix, Ariz. Its first “large breakthrough” came in 2001 with Desert Schools CU, also in Phoenix. With the refi market just about over and credit unions faced with competing in a purchase market with higher interest rates, Pantea said it’s more important than ever that credit unions be a position to effectively compete for market share. So the CUSO has shifted its focus to the mortgage market. “Traditionally, credit unions haven’t been that strong a player in the purchase market because their mortgage product is positioned low down in the value chain,” he says. “Credit unions need to be positioned closer to where the decisions are made, and the realtor controls that decision. CU Realty allows credit unions to position their mortgage product closer to the decision point and gets us closer involved with the real estate community.” CU Realty’s Web-based technology allows CU members who are buying or selling a home to link to the Multiple Listing Service to see pertinent information about the area they’re considering moving into – demographic information, school listing, pictures and information about homes for sale. When a member buys or sells a home through CU Realty, it earns a 1% rebate on the cost of the home at closing. Pantea said that’s possible because the realtors refund about 35% of their commission back to CU Realty. In addition, CU Realty recruits realtors from a variety of brokerage operations, and Pantea says that sends the message to CUs that it has no tie to a single realtor. He added that realtors who are listed on the CU Realty site commit in writing to refer members to their respective credit union for financing. “Credit unions in the past have sometimes found leads they gave realtors were sent to other lending channels, and that created a lot of apprehension among some credit unions over dealing with realtors,” Pantea says. “CU Realty is a credit union-owned business, so there’s no conflict of interest. CU Realty is an advocate for using credit unions when the decision is made to purchase a home.” CU Realty recently went live with Wright-Patt CU, and it will be going live with Bethpage FCU, N.Y. on July 14. Corn said he’s also talking to other large credit unions in California and in Michigan with State Employees CU, Lansing. He estimates CU Realty will go live with CUs in Nevada in August; in Maryland/Virginia/D.C. in August; in three New England states, Florida and Texas by the fourth quarter 2004; and Kansas and Missouri by the first quarter 2005. Corn says he has a waiting list of real estate agents who want to join the service. In addition, he said Member Gateways partners in five other states are in the process of working through the initial implementation of the CU Realty model. -