Three Keys to Choosing a Mortgage Secondary Market Investor

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 decision.

 

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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 decision.

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.

  1. 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.”


  2. 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.”

  3. 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, D.C.

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 happy.”

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.

This sponsored content article is provided to the credit union community for shared insights and knowledge from a recognized solutions provider in the industry. Please note that the views and opinions offered here do not reflect those of Callahan & Associates, and Callahan does not endorse vendors or the solutions they offer.

If you are interested in contributing an article on CreditUnions.com, please contact our Callahan Media team at ads@creditunions.com or 1-800-446-7453.

 

May 17, 2004


Comments

 
 
 
  • the article is very interesting, where do you find your investors? is there a service that you use for it or clasify them?

    thanks

    Johnny Romero
    johnny
     
     
     
  • d er tals emi raty kay
    Anonymous
     
     
     
 
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