RENO, Nev.–Don’t try telling Jennifer Denoo it is difficult or impossible for consumers to get a mortgage due to tighter underwriting standards in a post-crisis market.
“This is a total myth,” she said flatly.
Denoo, chief operations officer for $120-million Great Basin Credit Union, said the CU’s mortgage volume is “better than ever” and it is seeing a good number of quality applicants.
“We have tried to bring more attention to mortgages through our branches and on our website, but really it is the low interest rates that are getting people to call us,” she said. “About 55% of our mortgages are refinances. Even on refinances you hear 'No one can refinance, because they are so upside down,’ but the truth is a lot of people have equity. I think a lot of people have saved money the last couple years and are willing to put money down on a purchase or even on a refinance.”
With more standardization of mortgage products in the wake of the crisis, Denoo said she is seeing fewer applicants shopping around the competition.
“The members that come to us and ask about a mortgage loan close their mortgage with us,” she said. “They cannot shop like they used to and they can’t play games like they used to. All of the disclosures are standardized, and no longer can lenders lower the rate but add a fee.”
Lowball Appraisals Spark Anger
Appraisers in GBCU’s Northern Nevada market area are going off current sales, Denoo explained, meaning if a neighborhood has more short sales or foreclosures than actual sales, the home is often worth more than the appraisal–but the homeowner does not get credit for the higher amount.
“Everyone thinks their house is worth more, so when they get their appraisal they get angry and take it personal,” she said. “But based on the standards the appraisers have to deal with, I understand why they are being conservative. Back in the heyday, five to 10 years ago, the appraiser would ask what the house needed to be worth and that’s the number we would get. It is not like that anymore.”
With regulators expressing concern about increased exposure to interest rate risk, Great Basin’s management has determined the level of IRR it is willing to assume and measures on an ongoing basis its exposure to that risk.
In addition, GBCU said it has identified “key strategies” it can utilize to help mitigate that risk throughout a variety of interest rate scenarios.
“When it comes to mortgages, each one is looked at individually and our decision on whether or not it is retained is based on the structure, the credit union’s balance sheet structure and need, as well as any strategic goals the credit union may have,” said Denoo. “We monitor interest rate risk daily to determine if we are near our cap, and how many 15-year or 30-year mortgages we have.”
The goal, she continued, is to keep all of its portfolioed mortgage loans saleable, so in the case of future liquidity needs the loans can be sold.
“We pick and choose loans to portfolio that gave good loan-to-value or a shorter term, because they have less risk,” she said.
Great Basin’s mortgage volume is not as high as it was at the height of the market, but compared to 2008-2010, which was dismal, it is higher, Denoo said, adding the credit unions was not really in the mortgage market prior to the bubble.
“We definitely think being able to offer mortgages is a good thing for our credit union,” she said. “It is a product that is very important because it builds the relationship, whether or not we keep it in our portfolio.”