Credit unions are now recording some of the best mortgage lending results ever. Low mortgage rates are one of the reasons. Stabilizing housing prices may be another. Larger, though, than these two reasons is the pervasive distrust current and would be homeowners have developed for 'traditional' mortgage lenders. How can you blame them? We all know the stories, from investor woes to market throes to borrower foreclosures. What's odd, and strangely in our favor is credit unions aren't truly seen as 'traditional' mortgage lenders, even though we've been in the business since the late 1970s.
Truth be told, credit unions have been and are the most traditional of mortgage lenders. We've eschewed exotic products, elaborate financing schemes and the bait and switch maneuvers so deftly employed by the mortgage brokerage community. While we weren't really content with stagnant, decades-long market share position, we were comfortable in our knowledge that we put members in homes affordably and sustainably. In short, we did the right thing. If that's non-traditional in the eyes of consumers, bully for us. Doing the right thing is now paying dividends.
How long will this light shine on us? How long will this flight to safety endure? Mercy Jimenez, Senior Vice President of Corporate Strategy for Fannie Mae, believes this window of opportunity will last another 18 months. We agree. Plenty more sub-prime and alternative credit ARMs are scheduled to reset between now and 2010. The credit markets continue to adjust their pricing and risk models. Then there's the uncertainty about the economy, with the looming prospect of inflation. Consider, too, that more than one trillion dollars in origination capacity has evaporated in the past twelve months, much of it never to return. Then there's the fact this is an election year. You can see why the rare opportunity we've been presented with remains open to us for the next year and a half.
Eighteen months. Two Summers, two Winters, two Falls. One Spring. Two Thanksgivings, two holiday seasons. An eternity, really. As one of our credit union colleagues reminded us, though, time passes more quickly as we get older. This time will pass us by, too, if we don't act now.
What do I suggest we do? Five things, immediately:
- Commit your credit union's culture to housing finance. Members are looking for trusted, reliable lenders and sustainable loans. We do that. Need another reason? Auto Lending is showing it's age.
- Position your credit union as your community's mortgage lending expert. Part of our mission has always been education. One lesson learned from the sub-prime crisis is mortgage illiteracy has run amuck. Consumers are finding they can trust us, that we're reliable. It's a short step from this new-found perception to being seen as your community's housing finance expert.
- Become a Government Lender. FHA lending has been all but dormant for a number of years. While It didn't disappear, it did take the fifth seat in the family minivan for the last decade. Get your HUD approval now, or find a partner so your credit union doesn't miss out. Government lending, by some estimates, could account for more than 30% of all loans in the next 12 to eighteen months.
- Which Niche is Your Niche? I don't know about you, but I'm growing weary of being reminded credit union membership is aging. Fact is we've been talking about this demographic shift for more than a decade. It's time we did something about it, and that something is concentrating on first-time homebuyers. First timers tend to be younger, in their twenties and thirties. They are also looking for the type of relationship we can deliver: personal service and advice combined with on-line convenience. Concentrating on first time home homebuyers is a 'twofer' strategy, an excellent source of new mortgage business plus younger members looking for long-term relationships.
Another natural niche for credit unions are the emerging or surging markets. This is a second demographic shift. Like first-time homebuyers, emerging market members are looking for a financial institution they can trust. Buying homes, financing cars, saving for their children's education and retirement are all very much on their minds. This is a second, natural market for credit unions, and, on balance, likely to be on the younger side of us old and aging members.
Finally, denial is not a strategy any more than hope. We cannot deny our members are getting older no more than we can hope they'll get younger. The third niche, then, is our current members. The product is reverse mortgage lending.
- Understand your secondary market options. Subprime slop has forever changed the credit markets, things simply will not return to the way they were. Sure, credit will become more accessible in the not too distant future. It will probably be priced more rationally, too. Yet for credit unions to focus on first-time buyers, the emerging markets and affordable housing, we're going to have to learn to use our balance sheets more effectively while becoming much more capital market savvy.
A final thought. Let's not make the mistake so many lenders made during the heady days of refinance booms gone by: thinking current market condition are normal, that they will go on forever. That's not going to happen. This opportunity, too, shall pass, like the refi days of old, unless we commit to strategy and execute with speed and agility.