SACRAMENTO, Calif.–The Golden 1 Credit Union is in the middle of one of the biggest refi booms in its history.
Donna Bland, president and CEO of the $7.9-billion credit union, told Credit Union Journal the flood of both applications and approvals demonstrates the popular notion that mortgages are out of reach of most consumers in a post-Dodd Frank world is a misconception.
“It is more challenging than it was five years ago, especially for subprime borrowers, but for qualified candidates it is not difficult to get a mortgage,” she said. “One new challenge is 100% financing, which is very difficult to find. Golden 1 limits mortgages to 80% loan to value, and most lenders do the same. FHA loans only require 3.5% down, but we make very few of those loans–we promote our conventional products.”
Golden 1 is seeing varying levels of credit quality among mortgage applicants, which Bland said is to be expected. She said in the last year there has not been much change in the quality of applications.
“Golden 1 is known in the community and has members of higher quality,” she declared. “We are not a subprime lender and never have been, so we don’t see sub-prime applications. At the end it comes down to value of the home, loan-to-value and the borrower’s ability to make the payment. There are a lot of options out there. We are originating more loans than we have in a long time, and we are helping members manage their payments. The low rates really help, and a lot of members are choosing the fixed-rate, 30-year option.”
Slightly more than half of Golden 1’s mortgage applications are refinances, but because most of the purchase applications are for pre-approvals that do not come to fruition, the vast majority of loans the credit union books are refi’s. Bland said in the CU’s service area as soon as homes go on the market they sell, often to cash buyers.
“There are people shopping with pre-approvals, but they are losing to the cash buyers, so the net result is 98% of the mortgage loans we actually finance are refinances.”
Although there are a number of mortgage lenders in Golden 1’s market, Bland said it has “plenty” of applications in its pipeline.
In fact, she said the credit union has not been advertising its mortgages in recent months in order to give its staff a chance to manage the large number of applications already received.
“There is a lot of competition but there also are a lot of refinances out there,” she said.
Short Sales Play Havoc With Comps
The Golden 1 uses a third-party appraisal service that identifies and selects quality appraisers, and Bland said it has an “extensive” quality-control process as part of its underwriting, “But there still are problems finding good comparisons due to the large number of short sales. There are challenges, but our appraisals still need to be reliable.”
Golden 1’s mortgage volume in September was “strong,” Bland assessed, saying it was roughly twice as much as the same month one year prior.
“We did $35 million in September and $60 million in August, compared to $25 million per month in those months last year,” she said.
Which Loans Get Retained
The credit union retains in its portfolio the loans that meet its “stringent” underwriting standards, and it sells to the secondary market any loans that exceed its risk tolerances, Bland said, adding, “Our overall portfolio is well diversified and we evaluate our portfolio for interest rate sensitivity frequently.”
As is the case with many mortgage lenders, Golden 1’s monthly volume peaked during 2005 at more than $45 million. As the housing/mortgage crisis took hold the average plummeted to $20 million per month in 2006, followed by $29 million in 2007, $17.5 million in 2008, $20 million in 2009 and 2010, and $18.4 million in 2011.
Through September, the monthly average for funded mortgages in 2012 has shot back up to $39 million.