LAS VEGAS — Meeting here on the very day the Fed lowered the fed funds rate to help stabilize the markets came a blue-sky call for credit unions to put themselves in consumers' minds as first choice home lenders. In the very storm of the subprime meltdown, increasing foreclosure rates and higher numbers of late payments came a call to "Seize the Loan!"
Never mind all that, "we didn't start the fire" every speaker at the second meeting of the Credit Union Housing Roundtable seemed to say, now is the opportunity of a lifetime for CUs to march into the future of American homeownership. While the message isn't exactly new, as ACUMA, which also meets here this week, and other CU organizations have issued calls to boost the share of mortgages and expand programs to small and mid-sized CUs, this latest challenge comes at a break point. The mortgage business is in turmoil and CUs have some good answers to problems.
The dialog has to change, however, said Roundtable founders Chip Filson (president/CEO) of Callahan's, Joe Brancucci (president/CEO) of Prime Alliance and Gary Oakland (president/CEO) of BECU. The old mindset of mortgage lending is outdated, all said. "What's in a name? It's about housing finance," said Oakland. "It's important for us to use language the consumer understands because no one really looks for a mortgage first. First comes the house; they find a house, get a realtor and then search for a home loan mortgage. The application is one of the last steps, so credit unions, need to broaden our terminology."
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While other lenders are scrambling to find liquidity in the credit crunch, CUs have it to make loans, said Filson. "Credit unions have $145 billion worth of investments on top of $63.5 billion in cash, so liquidity for most should not be a problem," he said. He ran some numbers for the group, including the fact that first mortgages are now a larger percentage of the total CU portfolio at 52.3%. And with loan-to-share ratios holding steady (while softening in a few areas) the 12-month growth rate in real estate lending is increasing at about 10% per year over a year ago. Originations are up $1.7 billion in the first half of this year compared to a year ago while charge-offs are at .45%. In all, CUs posted $27 billion in mortgage loans in the first half of 2007," he said. "And credit unions have plenty of balance sheet room to operate."
NAFCU CEO Fred Becker reported on the importance of monitoring possible legislation that may emerge in Congress, which just came back from its break and held hearings on the subprime mess and what to do about it and possible fixes. He warned to follow any attempts at raising the lending caps of the GSEs that might curtail the innovation CUs might pursue in their efforts to help consumers in resetting ARMs. Saying that both the House and Senate committees on banking-related services had held hearings right off, Becker said the "air had been sucked out of D.C. and I predict they'll continue to focus on mortgages." He specified that NAFCU had reached out to mainstream media to let them know that credit unions weren't involved in the subprime fiasco. Apart from a handful of CUs that have made bad mortgage choices ("and I don't have to mention them here") he said CUs could be a "beacon of hope" to consumers.
"One third of the mortgage market may shut down and there is still some $600 billion of subprime mortgages still to reset, many in January and February. There can't be any prediction on what home prices will do. Alan Greenspan now says that the jury is still out and I'll side with him," said Becker. (Greenspan, in a just published book, The Age of Turbulence, and a 60 Minutes interview, said that the housing problems are not over by a long shot and the inflation threat is worrisome.) Becker said CUs can show how they are different, now that so many unscrupulous and irrational lenders have folded, and the biggest opportunity may lie in making home loans to minorities.
Joe Brancucci, chairman of the Roundtable said CUs now could define the right way to do mortgage lending. "We weren't aggressive enough in the last two to three years but we can do what we do best now to help members who are stuck in resetting ARMs and subprime loans. We can't help all of them, and the biggest obstacle there is the prepayment penalty. Lenders will not loosen up on those."
He highlighted a BECU marketing effort that's been very successful called "We Fix Broken Arms" and offered the use of that phrase to any CU comers. "Strut your stuff," he said. "Tailor solutions to your local area, meet with community, realtor and housing agency groups."
The White Papers
The Roundtable issued two White Papers based on the major agenda topics covered at this meeting. The first dealt with reverse mortgages. The other is the "Two o Ten" effort to increase CU mortgage share to 10%, but that's been revised to only 8.5 years now owing to the deeper need and opportunity. Both will soon be available from the CU Housing Roundtable's Web site at http://www.cuhousingroundtable.com.
"This chance may never happen again," said Brancucci.
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