Credit Unions Adjust to Record Mortgage Loan Application Levels

As interest rates hit new lows, credit unions across the country are taking a variety of approaches to keep up with record application volume.  What kind of volume are we talking about?  Looking at the number of first mortgage originations, credit unions have processed 31% more first mortgage loans in the first six months of 2002 compared to the same period last year, and 8% more loans than the he

 
 

As interest rates hit new lows, credit unions across the country are taking a variety of approaches to keep up with record application volume.  What kind of volume are we talking about?  Looking at the number of first mortgage originations, credit unions have processed 31% more first mortgage loans in the first six months of 2002 compared to the same period last year, and 8% more loans than the heavy activity period in the second half of 2001.  Through the first six months of 2002, credit unions processed 231,885 first mortgage loans for a total of $26.7 billion in loans.

The chart below displays the Top 25 credit unions over $50 million in assets with the greatest percentage increase in their mortgage originations for the first half of 2002 compared to the first half of 2001.  First mortgage growth for these credit unions ranges from 237% for Teachers FCU in New York ($1.3 billion in assets) to 511% for Los Angeles Firemen’s Credit Union ($505M in assets).  These are significant increases for a one-year time frame.  Over the coming weeks, we will be presenting case studies of some of these credit unions to understand how they’re handling this tremendous volume, and gain some insight into mortgage program management which may be useful to other credit unions.

We thought we’d start near the top and take a look at Financial Partners Credit Union, a $538 million community credit union based in Los Angeles.  In all of 2001, they originated approximately $105 million in first mortgage loans.  In the first half of 2002, they handled $140 million in first mortgage loan originations, increasing 288% over the $36 million processed during the same period one year ago.  “At one point, we had pipelines as high as $160 million, ” reports Vince Mastrangelo, Director of Loan Production.   How did they do it?  Financial Partners put a variety of measures in place to manage the volume, including product changes, staffing, and third party processing as well as simply managing member expectations.

“We’ve eliminated our no-cost refinancing program,” explains Mastrangelo, “offering it only on new home purchases.  We also advise members that we expect it could take up to 90 days to process their loan.  The snag isn’t only on our side.  We used to get appraisals in 3 to 5 days, now it’s taking 10 to 15, while escrow and title services are taking 7 to 10 days.”    Although he estimates that 90% of their business is refinancing, they do treat purchase mortgages as a priority, expediting processing to get them completed by the closing date.

“We’d like to hire more loan processing staff,” says Mastrangelo, “but we couldn’t find qualified personnel.”  Currently Financial Partners is using five temporary personnel in addition to their three loan processors, as well as contracting out some of their processing to an outside company.  After taking the member’s application, they advise their members that a third party will contact them for documentation, but send it back to Financial Partners for underwriting. 

According to Mastrangelo, their refinancing volume is primarily initiated by members, “We’ve done no marketing for over a year, other than a sign in our branches or a mention in our newsletter.”  However, for next year they expect to focus on advertising their Home Equity Line of Credit and Second Mortgage programs.  Mastrangelo says that member interest in second mortgages is increasing due to a desire to avoid PMI, and Financial Partners considers these products an important aspect of increasing the member’s reliance on Financial Partners as their primary financial institution.