COLORADO SPRINGS, Colo.-Successful credit union mortgage lenders are reporting the secret lies, fittingly, at home with their own members.

Bill Vogeney, SVP/chief lending officer at Ent FCU here, noted that just 5% of its member base has a mortgages with the $3-billion credit union, but that figure is considered good in the industry. He argued that CUs need to go after the "low-hanging fruit" of members who already have a good relationship with them before thinking about competing in the broader market.

Credit unions' failure to get better mortgage penetration with their own members stems from a "combination of [the wrong] business model to be a major player in the mortgage marketplace and not living and breathing mortgage loans," he said. "It's an extremely important product for member relationship."

Joe Brancucci, EVP at Boeing Employees CU, Tukwila, Wash., reminded, "The best loan in terms of relationship building and profitability is a mortgage loan. Members with a mortgage use more services than non-mortgage members. We know this from study after study, reaching back many years. It makes sense, too, especially if we concentrate on first-time buyers, as they have many and varied financial service needs."

Meriwest Mortgage in San Jose, Calif., has been successful in targeting those first-time buyers over the last two years, funding more than $18 million worth of such loans for buyers with low to moderate incomes. The tougher scrutiny, below-market prices and downpayment assistance programs helped to cut down on potential risk, Meriwest Mortgage President Hudson Lee noted. In fact, of the 75 families who received loans through the effort, none have defaulted despite being in one of the hardest hit "sand states."

Today, credit unions face a dearth of new but unprofitable members as deposits have surged in response to the financial crisis. But there is a potential silver lining.

"When we started out in mortgage lending, we were competing with the Countrywides which were making all sorts of loans we just had no business doing," said EVP Rex Rollo of Ogden, Utah-based America First CU. "We know that potential is out there and we're starting to mine that. It's that trust factor that we have with our members that is now coming to fruition. We've been working on this for a few years but that doesn't mean you can't start today."

Offering a little sweetener also helps-while America First offers discounts on its origination fee, Lee noted that Meriwest incentivizes mortgages on both ends of the transaction. It offers better deals to members based on the number of products they have with the credit union and it has ramped up its employee incentive program for referrals. The referral program, which pays much better than other employee incentives, has paid huge dividends, generating $44 million in loans last year, about 15% of the $302 million in mortgages Meriwest originated in 2009.

"Financing homes is unlike consumer finance. The transaction is larger, it takes longer, it's much more emotional," Brancucci told Credit Union Journal. "And it's uncharted territory for first time buyers, much like this market is uncharted for mortgage lenders. It's something we'll have to explore together, and, if we're patient, both credit unions and their members will benefit."

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