Jumbo Relationships For Credit Unions

Credit unions are seeing the size of their members' new mortgages climb and with low interest rates, there are more members demanding 15-year and 30-year, fixed-rate jumbos. This has left many credit unions looking to maintain member relationships while finding a source to sell their loan. Find out how one company takes a look at changing this perspective.



As more real estate markets see home prices soar, credit unions also are seeing the size of their members' new mortgages climb proportionately. A greater number of jumbo loans are being originated as credit unions become comfortable making jumbo ARM loans that they will keep in-house. However, with low interest rates, there are more members demanding 15-year and 30-year, fixed-rate jumbos, which has left many in the credit union industry looking for a jumbo loan outlet.

While credit unions with jumbo mortgages have found sources to sell their loans, the challenge has been to maintain their member relationships in the process. Network Liquidity Acceptance Company, LLC (NLAC) has changed that picture, according to Karen Pease, NLAC's managing director.

''As a corporate CUSO, NLAC understands the value and importance credit unions place on maintaining member relationships,'' said Pease. ''Other investors will buy jumbo loans from credit unions, but they also want to service the credit union members and ultimately cross-sell to these members. That's not the case with NLAC. We want credit unions to continue their relationships with their members. We encourage credit unions to become their members' primary financial institution, providing all the financial services their members need.''

How valuable is the member relationship? Valuable enough that many outlet sources are paying a premium to credit unions for the opportunity to have that relationship. That is particularly true of larger loans from more-affluent buyers. These non-credit union parties are finding they can recover that premium payment through cross-selling. There is tremendous value to be gained by the credit union industry in maintaining primary home-loan relationships. Cross-selling by vendors is always occurring, but the inside track belongs to the servicer or perceived servicer of the home loan.

Credit unions need to have a credit union solution for non-conforming loans to keep those relationships. NLAC provides credit unions a valuable option to consider since it was established as a corporate network product offered through all corporate credit unions. Jumbos can be serviced in two primary ways through NLAC. First, jumbos can be sold servicing-retained by the credit union if that credit union qualifies as a servicer. Second, jumbos can be sold servicing-released with customized brand-name servicing that is transparent to the member. In addition, credit unions have another servicing option: becoming a sub-servicer. This option allows the credit union to service their own loans after selling them servicing-released, and then receive a servicing fee for completing the transaction. Because there is no cross-selling by NLAC whether the loan is sold retained or released, the credit union plays the primary financial institution role in communicating other product opportunities to the member.

Jumbo loans can be sold to NLAC either on a loan-by-loan basis or in bulk. Pricing will vary based on the choice of servicing. NLAC offers 10-day, 30-day, 45-day and 60-day funding time frames. For all timeframes a long-term relationship is the gain verses a short-term pricing opportunity. The member and the credit union benefit when the credit union chooses to have a long-range focus using the right partner to accomplish the task.

The Corporate Network created Network Liquidity Acceptance Company, LLC, in 1998 to provide credit unions a unique source of liquidity. NLAC purchases loans such as mortgages and auto loans from credit unions and holds them until an efficient size is reached to securitize or sell in the secondary market. For more information on NLAC, contact your corporate credit union; call (888) 872-0440, ext. 6153 for Jim McClintick, director, national accounts; call (888) 872-0440, ext.6074 for Karen Pease, managing director; or visit www.nlac.org.



Jan. 5, 2003