Two things typically happen when we begin a new year: We reflect on what occurred during the past year, and we look ahead to how we can improve in the upcoming months. This principle also can be applied to lending and loan growth initiatives.
The year 2003 was a year of heavy volume. Mortgage origination totaled approximately $3.31 trillion, with credit unions accounting for nearly $81 billion. Credit unions were so busy with originations, mostly refinances, that they barely had time to look up, look ahead or even think about the impact to their balance sheets of originating large volumes of long-term, fixed, low-interest rate loans.
With the new year and the slowdown in refinances, 2004 originations are estimated to decrease to $1.6 trillion, with credit unions accounting for $40 billion. This still is quite an opportunity, especially since credit unions will be focused on increasing market share by going after the purchase money market. To grow market share, credit unions need to position themselves as their members' primary financial institution. Keeping the member relationship and maintaining the servicing when credit unions sell loans into the secondary market are two ways to achieve that goal.
In addition, being able to offer credit union members a choice of mortgage products at competitive rates increases the chance that a credit union will make that loan. In the past, if a member needed a non-conforming loan, credit union options were limited. To be competitive on the rate and make the loan, a credit union often sold the servicing and probably lost the member. In the case of jumbo loans, that could be a member which the credit union cannot afford to lose.
Even though the agencies recently raised the conforming loan limits to $333,700, housing prices continue to rise, and some members will need access to loans with higher, non-conforming loan amounts. Certain geographical areas are high-cost housing areas and require members to enter into jumbo loans. Now that credit unions have a moment to breathe and determine the direction they want to take with marketing their lending products, credit unions may want to include jumbo loans as part of their strategy. The Corporate Network has developed a solution for credit unions that keeps the servicing relationship right where it belongs - with the credit union. That solution is Charlie Mac, LLC.
''You can't talk about credit union lending without talking about Charlie Mac,'' said Nizar Hashlamon, manager, quality assurance and secondary market operations, Bank-Fund Staff Federal Credit Union. ''We look forward to continuing to develop our relationship with Charlie Mac. We have used other jumbo investors in the past and found that the JumboExpress program was more flexible in meeting our unique credit union needs.''
Charlie Mac offers flexible, custom-tailored, secondary-market investor solutions. It focuses on enabling credit unions to retain member relationships after the sale of their loans.
For more information on expanding and exploring lending in 2004, contact your corporate investment representative.