Greylock Federal Credit Union ($1.2B, Pittsfield, MA) began as the credit union for the Pittsfield, MA, General Electric Co. plant. When GE ceased operation in Pittsfield in the 1990s, Greylock — which is named for a local mountain — converted to a community charter in 1997. It now serves those who live, work, worship, attend school, or regularly conduct business in Berkshire County, which is the westernmost county in the state and has a population of 132,000.
According to the credit union, its loan portfolio is approximately 65% real estate, 25% auto, and 10% commercial. It holds $640 million in real estate loans on its books, $25 million of which is in fixed mortgages. It has sold $350 million of fixed mortgages to Fannie Mae, though retaining the servicing.
Lisa Trybus is the head of real estate lending and Marilyn Sperling is the CEO. Together they answered questions about Greylock’s real estate lending. Greylock has captured 27% of the real estate market, and The Callahan Report wanted to learn how a credit union achieved an almost 30% mortgage market share.
What are the main factors in your success as a real estate lender?
Lisa Trybus& Marilyn Sperling: Credit unions need to make sure they offer the mortgage products that meet the needs of the borrowers in their marketplace. When setting up our mortgage lending programs, it was important we had the appropriate mortgage options available to accommodate Berkshire County home buyers.
To grow market share, credit unions have to establish and foster relationships with those involved in the real estate mortgage process to earn their trust. Providing responsive and attentive service throughout the mortgage process is crucial to a successful operation. Realtors and attorneys have to believe, as we feel they do, that Greylock can handle a mortgage better than any financial institution in Berkshire County. We have been successful in earning their confidence. We hear from those in the community, realtors and attorneys, on just how pleased they are with our mortgage staff and the timeliness and simplicity of the mortgage process – evidence that people and relationships make a difference.
Equally important are experienced, well-rounded originators and underwriters. We have been fortunate in having a committed loan originator who is sought out by the local realtors and attorneys. She interacts with them regularly and follows up quickly. There is so much third-party involvement that takes place in putting a mortgage together and someone has to make sure everything and everyone is working toward a timely closing of the loan. Our loan originator is available to the realtors and attorneys just about 24/7, and they appreciate that.
Does the loan originator work under an incentive system?
LT&MS: She does. She earns commissions.
Return to the notion of service. How do you see it? How is it important?
LT&MS: Realtors and attorneys want to complete mortgages quickly and easily. Some institutions are easier to deal with than others. We work hard to streamline the process from loan origination to closing, and we believe this increases referrals to us from realtors and attorneys.
There is another aspect to the loan originator here. She does an excellent job of visiting parts of the community and presenting extensive seminars for first-time homeowners. These seminars receive publicity in our newsletters and elsewhere and repeatedly draw sizeable audiences. The loan originator brings in third parties to talk about various aspects of the mortgage process. The seminars take place at various locations and are not mere one-hour events; each is a course that takes six hours to complete.
Did you make a conscious effort to expand real estate lending?
LT&MS: When we converted to a community charter we were very aggressive about getting the word out that anyone was eligible to join Greylock if he or she lived or worked in Berkshire County, that we were no longer an exclusive club. Mainly the marketing was through newspaper and radio, a little off-beat with some humor. We promoted attractive rates. At that time fixed rates were higher and it was common to have discounted adjustable rate mortgages.
We have been the leading real estate lender in Berkshire County for at least 15 years. When we decided to grow and expand our loan portfolio, we were not doing member business loans, so our options, at that time, for loan growth were consumer loans and real estate loans. Today, we have 27% of the Berkshire County mortgage market share and 90% of the auto loan market share.
Our best advertising, though, is word of mouth. Our rates are competitive, though not always the lowest. It is the member-centric culture and outstanding service that makes us successful. That’s what brings people here.
What was the competition at that time?
LT&MS: Mainly it was local banks. The megabanks have never been considered competition in our market area. Some consumers go online to see what kind of rates they can get, but mainly the competition has been and continues to be local banks. We are a pretty parochial community – the community, the chamber of commerce, and the residents promote buying in the Berkshires, and supporting local institutions is very much a part of that effort.
What is your mix of refis and purchase mortgages?
LT&MS: In the past five years, not surprisingly, most of our loans have been refis. But a key factor in our success at market share has been not losing sight of the purchase market. We never want purchase mortgages to get lost in the shuffle. We meet all the dates and we close them promptly. We believe this is what sets us apart from the rest of the competition.
So your edge has less to do with the fact that you keep expenses low than it has with good service?
LT&MS:Yes. As noted, our rates have not always been the lowest, so we feel our edge is in service. We have never gotten to a closing and not closed the mortgage. Some of the competition gets close to settlement and then the closing doesn’t happen because something was not done correctly.
What has happened to your loan portfolio since the credit crunch of 2008?
LT&MS: We lost a little bit of market share. Fannie Mae tightened credit standards. What we lost was to a broker who wrote FHA loans. FHA has broader underwriting standards and some competitors jumped in to do them. We choose not to offer FHA programs. If we feel a member cannot fit into one of our products but might qualify for an FHA loan, we send that member to a local broker with whom we have a relationship. Conversely, if that broker is talking with a person he feels would be better in one of our loan programs rather than with an FHA loan, he refers that person to us. It’s all about fitting the member into a product that works for the member.
How is delinquency?
LT&MS: The current economy has created challenges for borrowers and financial institutions. We are having more tough conversations with members about the affordability of owning a home. Although we work hard with borrowers, sometimes the best solution is to sell the home. We work through each borrower situation one at a time.
How does the structure of your lending management team work?
LT&MS: We have a chief lending officer who is responsible for asset quality and our overall loan programs. Lisa manages the retail portion of lending – the consumer loans and mortgages – while another manager is responsible for member business loans. Our loan review officer reports to risk management. The CFO is responsible for the allowance for loan loss. There is a great deal of staff interaction among departments; this is very important.
What’s in your crystal ball for Greylock and for credit union mortgage lending across the country?
LT&MS: We’re anticipating minimal growth in lending. Our portfolio is amortizing as quickly as we’re putting on new loans. This is primarily due to the fixed rate mortgage activity and the subsequent sale of those loans.
The recession changed the way consumers think about debt. They are more careful about borrowing. Financial institutions are adjusting their strategies to accommodate this environment.
Do you use a CUSO?
LT&MS: Yes. We have a CUSO for property and casualty insurance. It fits well in our business model. As the largest provider of home and auto loans, we can offer competitively priced insurance all under one roof. It’s one more way to deepen the member relationship.
Might there be a future for a secondary market in credit union mortgages?
LT&MS: If there was a secondary market for credit union mortgages, and the premium paid for credit union mortgages was more than Fannie was paying, we’d certainly look at it.
Click here to download the full July 2012 Callahan Report.