HUNTINGTON BEACH, Calif. – During the refi boom, credit unions barely had to do any creative marketing to attract members' mortgage dollars. In fact, some CUs had all they could do to keep up with applications. But that's over now, and credit unions have to put their creative mortgage hats on to compete in the market. "One of the things that we see is a tendency to do plain vanilla," said Linda Clampitt, VP, CU Members Mortgage. "We're very good at portfolio, good at Fannie and Freddie, but there's a much wider playing field out there." "Where we're losing business as an industry is on the products side," Clampitt continued. "Other providers are creating products that serve people's lifestyles, and a plain old vanilla fixed mortgage just isn't going to cut it anymore." Clampitt and CU Members Mortgage professionals discussed this issue recently at the company's annual lending conference. Clampitt shared a sobering statistic -credit unions are actually losing mortgage market share, down from as recently as two years ago. "You don't have to have the lowest price out there, but if you have a good, competitive price, and offer all the bells and whistles, you have a good enough product to compete with anyone," she offered. Those "bells and whistles" include the ability to fund mortgages nationwide, lender-paid mortgage insurance, 40-year term loans, 100% financing, "piggy-back", or combination loans, sub-prime products, interest-only loans, hybrid ARMs, reduced or no document loans, interest saver programs, realtor rebates, escrow transfer, and online servicing access. Training Manager Wallace Jones said the key to selling mortgage insurance is training staff to properly educate members regarding the benefits of a product that lacks popularity with consumers. "Members are looking to you for financial advice, and sometimes MI makes better financial strategy sense for them, not to mention the convenience of only making one payment," he said. "It gives you one more product to market to members, which is one more advantage over your competition." West Coast Regional Manager Lorraine Lachapelle said she has seen an increase in demand for 40-year mortgages in California, where property values have skyrocketed in recent years. "I would have never thought that just five years ago, but people in their 50s and 60s are still planning for their futures; and of course, there's the young couple that can get into a house with a 40-year term that couldn't have with more traditional products." What's also changed is the association of 100% financing with high risks. "We used to say the reason you needed a down payment was so that when times got rough, it would be harder to walk away from the home," Clampitt said, "But now, we believe that homeowners are excited about their home, have a lot of pride in ownership, and are likely to make the payment, no matter what." So has the notion of offering sub-prime loans. "We get members all the time calling and asking for help with their credit," Lachapelle said, "And they will get help somewhere, so we have to be passionate about providing financial counseling for members." Jones added that some members select a sub prime product when they don't even need it. "Sometimes it makes more sense to go into a subprime product that has a higher rate, but because there's no mortgage insurance, the payments are smaller," he said. Clampitt joined in on the topic too, saying that investment property buyers like sub prime lending because there's no limit on how many properties they can finance. "Prior to six months ago, I thought it was only for credit-challenged folks, but I've been surprised to see how many people with mid-700 scores are going for sub prime products – it's really a niche market," she said. Regarding interest-only financing, Lachapelle said that in California, high property values have made the product a necessity for many buyers. In fact, in Orange County, 30% of mortgage loans are interest-only. "I don't think they're basing the decision entirely on appreciation speculation," she said. "Many people are just trying to find a way to get that payment down." Products aside, Clampitt also recommends that credit unions develop relationships with realtors. "In this day and age of a purchase money market, you must have a realtor relationship," she said. "We need to be proactive and not only cultivate a relationship with our members, but also with realtors and builders." -

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