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Midnight in CU mortgage lending (Article for Credit Unions)

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When was the best time in credit union mortgage lending?

If you’ve seen Woody Allen’s latest movie, Midnight in Paris, then you may already know the answer to this question. The best time, of course, is right now.

Sure, we might long for the good old days when there were fewer regulations and credit was easier to access. But back then, there were also far more competitors and far less appreciation of our industry’s mortgage lending philosophy and capabilities. These days, people are increasingly turning to credit unions for their mortgage needs. The momentum continues to build as negative depictions of Bank of America and favorable portrayals of credit unions in the media have helped spur interest in our direction. Credit unions’ share of the mortgage market now stands at over 6 percent, an all-time high.

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Midnight in CU mortgage lending (Article for Credit Unions)

  1. 1. Inside NAFCU ServicesMidnight in CU mortgage lendingBy Dan GreenW hen was the best time in credit union mortgage lending? If you’ve seen Woody Allen’s latest movie, reason the time is now — affordably is better than at any time Midnight in Paris, then you may already know in the past.the answer to this question. The best time, of course, is right These conditions mean that credit unions can help morenow. members, especially first-time buyers, purchase homes than Sure, we might long for the good old days when there were ever before. Are we ready to take advantage of this?fewer regulations and credit was easier to access. But back The first three ‘time is now’ reasons are strategic. The mediathen, there were also far more competitors and far less ap- has shoveled positive free press upon us, so more peoplepreciation of our industry’s mortgage lending philosophy and know about credit unions. The market has moved to wherecapabilities. we’ve always been and housing is highly affordable. The These days, people are increasingly turning to credit unions fourth reason the time is now is tactical: HARP 2.0.for their mortgage needs. The momentum continues to build The Obama administration announced HARP 2.0 inas negative depictions of Bank of America N ­ ovember 2011 in an effort to help “and favorable portrayals of credit unions underwater homeowners refinancein the media have helped spur interest in their loans to make them more afford-our direction. Credit unions’ share of the These days, able. HARP 2.0 is different from the firstmortgage market now stands at over 6 iteration of HARP 1.0 in that many ofpercent, an all-time high. people are the original program’s restrictions are The Credit Union Housing Roundta-ble, a group of strategists in credit union increasingly turning gone, including loan-to-value limits. The new HARP program also removeshousing finance, set a goal of reachingthe 10 percent share threshold by 2016. to credit unions the earlier restriction that lender and servicers could only refinance mort-That goal, which was set back in 2006, for their mortgage gages from existing customers. Starting ”now seems not only achievable, but easy in late March, any lender, includingto surpass. This is the first of several rea-sons why the best time for credit union needs. a credit union, can help any eligible b ­ orrower.mortgage lending is now — thanks to all Large lenders already have market-the free marketing we’ve gotten through ing plans. They know who qualifiesthe media, more consumers know about credit unions than for HARP some of whom are your members. As soon as the ,ever before. government-sponsored enterprises fire the starting pistol, Another favorable development we’ve seen is the loss of lenders will begin soliciting. We need to ask ourselves: Howcompetition. Consider that at one point, mortgage brokers are our marketing plans coming along for HARP 2.0?controlled more than 40 percent of all housing originations. While it’s a tactical activity, what we learn from participatingToday, they have all but left the business of originating loans. in HARP 2.0 has strategic implications. The same marketingIt’s not surprising why the broker model has fallen out of tools we use to identify who is eligible can be used to identifyfavor — it was the riskiest channel. who will be buying their first or next home. By contrast, retail lending is today’s preferred channel of Still longing for the good old days? At the end of Midnightchoice because it’s the safest. After all, retail lenders know who in Paris, Owen Wilson’s character learned that the best time totheir borrowers are. This is the second reason the best time for live in Paris is when you’re living in Paris. So it is for mort-credit union mortgage lending is now — the marketplace has gage lending. The best time to be a mortgage lender is theshifted to where credit unions excel. This also means that we’ll time in which you are lending. It just so happens there arebe seeing a greater number of high quality loans. four very good reasons why right now is that time for credit On top of all this, rates are historically low and so are hous- unions. sing prices. In November 2011, the National Association ofRealtors’ housing affordability index was 194.5, nearly the Dan Green is executive vice president of credit union solutions forhighest it’s been since its inception in 1971. This is the third Prime ­ lliance Solutions, Inc. AThe Federal Credit Union MARCH/April 2012 43

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