12 FOCUSREPORT/Mortgage Lending
Just as you wouldn’t climb Mount Everest without the expert guid- ance of a Sherpa, a credit union needs expertise to build
and maintain a successful mortgage portfolio. Especially now,
with the many regulations that are
in place in this particular corner
of our business.
The problem for too many mid-sized and smaller credit unions is
there is a lack of this mortgage industry talent at a reasonable price.
Many of these credit unions make
a valiant effort to educate and
train their loan people, but the
concerns over compliance and
doing everything just right can be
This is especially true when it
comes to the secondary market.
Originating mortgages with an
eye toward profitably selling them
into the secondary market gets
into an additional layer of com-
plexity that requires not only busi-
ness expertise, but intimate famil-
iarity with the finer points of the
Home Mortgage Disclosure Act,
TRID (TILA-RESPA Integrated
Disclosure) and the other alpha-
bet soup of ever-evolving regula-
While the complexity of the
mortgage business increases
when you add in the secondary
market factor, some of that is mitigated if a credit union wants to
hold the loan in its own portfolio
with no intent to sell it. That has
its shortcomings as a strategy for a
credit union, though, because this
tends to be a variable cycle.
Sometimes a credit union finds
itself with more loans on the
books than it needs, and the best
strategy is to sell some of those
loans on the secondary market. At
that point, if there are any short-
comings in the compliance relat-
ed to the original mortgage, it be-
comes problematic to sell it and
salvage much revenue. A credit
union could be stuck selling it to
the lowest bidder, receiving pen-
nies on the dollar
compared with what
it could have yielded
had it been done in
Some credit unions
tell us they want no
loans on their books,
but merely want to
be able to help their
members find the
best rate on a mortgage. Others want the
option on a case-by-case basis. What they
have in common is a
desire for the best approach for the member’s benefit.
Credit unions are understandably intimidated, yet they still
want to be able to serve their
members, and in an improving
economy, more and more members are going to be interested in
buying a home. How can a credit
union deal with this in the long
choice has come
down to an either-or
hire the (expensive)
talent to do it yourself, or outsource the
function to a partner.
There are advantages
to either of those ap-proaches, depending
on the unique membership characteristics of your credit
union and what you
want to accomplish.
outsourcing providers aren’t requiring a lifetime commitment,
and can instead serve as a temporary solution while a credit union
builds up its own mortgage origination and servicing capabilities.
A credit union can leverage the
partnering relationship as a sort of
learning laboratory. It can take the
opportunity to learn from the out-
sourcing partner and lean on that
partner to help train the in-house
talent at the credit union. It may
be a short term arrangement, two
years or less, in which the credit
union develops its own mortgage
This approach can get the credit union acclimated to the various agency products, the entire
mortgage process, and of course
the regulations and guidelines.
What they learn will help them establish the best types of software
and electronic solutions to put in
place once the credit union goes
out on its own.
By emphasizing training and
education, a credit union builds
its own expertise rather than recruiting costly existing experts.
And along the way, the credit
union can gradually take back
from the provider the pieces that
its people have mastered.
Scaling the Mortgage Compliance Mountain
eCU Mortgage, CUSO
of First Service CU
Mortgage Originations – Q1 2015 Mortgage Originations – Q1 2017
Credit unions have seen mortgage market share rise 7%
from Q1 2015 to Q1 2017. Banks have seen a decline in that
same period as online lenders start to take away share,
offering a more digital experience.
Credit unions have taken an edge in the auto space. Their auto
originations have increased from 1.54M accounts in
Q1 2015 to 1.93M in Q1 2017 – a 25% increase.
States with the highest concentration
of credit union members:
Banks own this space, but credit unions have
seen growth. Credit unions experienced an 18%
increase in card originations from Q1 2015 to Q1 2017,
and total credit limits on newly originated cards from
that same period approached $100B in Q1 2017.
Credit unions are most popular among
baby boomers, who make up 37%
of their members.
Credit Union Credit Union Credit Card Originations – Q1 2015
Credit Card Originations – Q1 2017
Credit Union – 4%
Credit Union – 3%
Other Bank Credit
Finance Other Bank Credit
21% 21% 23% 28%
25% 25% 29% 26%
Bank – 97%
Bank – 96%
In a new report, “The State of Credit Unions: 2017,” Experian revealed stats on credit union members as well as how credit unions are
faring on loan products in comparison to their competition. Check out key findings from the report here.
The State of Credit Unions: Mortgages, Auto Loans, Cards & More