BASKING RIDGE, N.J. — Credit union clients of the Credit Union Mortgage Alliance Network (CUMAnet) who have been limited in the mortgage loans they can make because of liquidity concerns, now have a new program to choose from that creates a unique secondary market within the CUSO's CU client community and keeps the mortgage loan money in a participatory, shared format among CUMAnet CU clients.
CUMAnet, a multi-owned real estate CUSO owned by three New Jersey-based CUs–Affinity FCU, Basking Ridge; Greater Alliance FCU (formerly Central Bergen FCU), Hackensack; and Proponent FCU (formerly HLR FCU), Nutley–and which also has 38 additional credit union clients nationwide, launched its new Multi-Partner Loan Participation Program on Oct. 10.
"We have some credit union clients who experience liquidity issues but still want to offer mortgages to their members," said CUMAnet Assistant Vice President, Credit Union Relations Leo O'Donnell. "If we go strictly by Fannie Mae and Freddie Mac guidelines to sell on the secondary market, they're very restrictive. With our new Multi-Partner Loan Participation Program we've created our own secondary market made up of our credit union clients that lets us keep the mortgage money in the credit union community in a shared format," O'Donnell said.
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While most loan participation programs typically include one seller and one program, O'Donnell said what's unique about the new CUMAnet program is it entails a one-on-multiple partners arrangement.
To meet NCUA guidelines, the seller CU has to hold a minimum 10% of the loan in its portfolio, but the CU also controls how much it wants to hold on to. For example, it can stipulate that it wants to hold the greater amount of 10% or $150,000 of each loan it does.
"It allows them to forecast their liquidity needs," O'Donnell said, adding that the originating credit union continues to service the loan in its name for the life of the loan and thereby retains the relationship with the member.
O'Donnell explained that the loan guidelines mirror those set by CUNA Mutual Group private mortgage insurance, which means it can do up to 100% financing or do cash-out up to 95% on a primary home and still get PMI coverage without being concerned whether the loan will be saleable to Fannie Mae or Freddie Mac.
All sellers and buyers of the loans must be CUMAnet clients. At this time all the loans that can be bought and sold are adjustable rate mortgages available in 15- 30- and 40-year terms.
O'Donnell said if there's enough interest in the program from buying CUs, the CUSO might expand the program to include its fixed-rate products.
In 2007, the CUSO also plans to expand the program to include home equity products.
At press time, the Multi-Partner Loan Participation Program was only about one week old, but already facilitated the buying and selling of three loans. Each of them had one seller and two buyers and were valued at a total of $1.5 million.
"These were loans we either wouldn't have gotten or would have left the credit union community if we didn't have our new program," said O'Donnell. –[email protected]
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