Strong relationships, attentive service, and multiple product options are common
qualities that members look for when choosing a credit union. In turn, these
are the same types of qualities that credit unions look for when selecting a
secondary market investor as part of their mortgage loan strategy. However,
there are other factors that credit unions should consider before making their
Credit unions are experiencing an increase in market share in the origination
of mortgage loans. In order to meet their members’ needs, credit unions
need to offer a variety of mortgage products. One of those product offerings
should include jumbo loans. Because of Fannie Mae’s and Freddie Mac’s
conforming loan limit of $333,700, credit unions have to shop for another secondary
investor to find one that will purchase non-conforming loans. And for credit
unions, this doesn’t mean shopping for a one-size-fits-all investor; it
means shopping for a secondary market investor that can meet the unique needs
of credit unions.
What do credit unions look for? According to employees of Navy Federal Credit
Union, Bank Fund Staff Federal Credit Union, Meriwest Mortgage Company, LLC
and Bethpage Federal Credit Union, it’s flexibility, having the ability
to maintain the member relationship through loan servicing, and risk management.
All four institutions have researched the market and have learned from experience
what traits are found in a successful mortgage secondary market investor.
- Flexibility. The secondary market investor should be accommodating
in helping credit unions meet their needs, according to Charles Stewart, assistant
vice president of secondary marketing for Navy Federal Credit Union, headquartered
in Vienna, Va. “You have to have an investor that is flexible and very
responsive,” said Stewart. “They have to be accommodating and
accept expanded mortgage loan products so we can customize what we want to
offer to our members.”
- A Servicing-Retained or Servicing-Maintained Option. Some
secondary-market investors may purchase a credit union’s loan, but because
they only purchase the loan servicing-released, they distance the relationship
between a credit union and a member. It’s good to shop for a secondary
market investor that will understand that credit unions want to maintain the
relationship with their member, according to Gregory Wirth, assistant vice
president of lending, mortgage servicing and secondary marketing operations,
Bethpage Federal Credit Union, headquartered in Bethpage, N.Y.
“When you sell your servicing relationship, you sell your member,”
Wirth noted. “With jumbo loans, these are members that you want to keep
at your credit union, using additional products that your credit union offers.”
- Risk Management. With the ability to sell long-term, fixed
rate loans to a secondary market investor, credit unions can manage their
interest rate risk, as well as manage the percentage of real estate assets
they have in portfolio.
“If we didn’t have a relationship with a secondary market investor
that we could sell our fixed-rate product to, we wouldn’t be able to offer
the same products we currently do to our members. And those are the products
that our members want.” said Nizar Hashlamon, manager, quality assurance
and secondary marketing, Bank Fund Staff Federal Credit Union, based in Washington,
According to Jack Buckman of Meriwest Mortgage, based in San Jose, Calif.,
the mortgage loan is currently one of a credit union’s best yield earning
assets. He states,“It is important for credit unions to offer mortgage
products including jumbo loans to their members, especially at a time when car
dealers are offering such competitive rates on auto loans. It’s easy for
consumers to finance a car through a car dealer, and for the most part, credit
unions aren’t able to compete. The auto loan as a yield earning asset
on a credit union’s balance sheet has been decreasing, whereas the mortgage
loan has become one of the better yielding assets.“
Stewart, Wirth, Buckman and Hashlamon agree, “The bottom line is that
you have the products and services available for members and are keeping them
Navy FCU, Bethpage FCU, Bank Fund Staff FCU and Meriwest Mortgage sell their
jumbo mortgage loans to Charlie Mac – a secondary market investor whose
products are available exclusively through corporate credit unions. Charlie
Mac provides these credit union originators a way to build and maintain successful
mortgage lending programs.
For more information on Charlie Mac’s products, contact your corporate
credit union investment representative.
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