LAS VEGAS–As credit unions increasingly are turning to mortgages to boost their loan portfolios, three CEOs said real estate lending is a key factor in their success.

Terry West, head of $4.7-billion VyStar Credit Union, Jacksonville, Fla., said his CU is the fourth-largest financial institution in north Florida and has carved out a significant market share.

“We have 20,000 mortgages in our portfolio,” he said. “It has been interesting in the last four years, and Florida now requires court approval for foreclosures, but mortgage lending is a critical part of what we do.”

Patsy Van Ouwerkerk, CEO at $2-billion Travis CU, Vacaville, Calif., said her credit union is the largest financial institution in the primary county is serves.

“We reach one-out-of-two households, but we do not have that same marketshare in mortgage lending–so we are setting out to change that,” she said.

Mike Valentine, CEO of $1.6-billion Baxter CU, Vernon Hills, Ill., noted “mortgages are a lead product for us. There has been a lot of evolution in the involvement of credit unions in mortgage lending.”

The three CEOs were part of a panel that spoke during the American Credit Union Mortgage Association (ACUMA) meeting here. Nader Moghaddam, CEO at $787-million Financial Partners CU, Downey, Calif., served as the facilitator.


Seeking A Lending Alternative

Asked by Moghaddam how mortgages fit into the overall strategic approach for each of their credit unions, Van Ouwerkerk said Travis CU saw fewer opportunities to make auto loans and needed a better alternative.

“We saw a lot of vehicles returned to us during the recession–many more of those than there were foreclosures,” she said. “About 31% of our lending is in mortgages. We looked at capacity and created positions to get branches more involved in mortgages. The plan is to increase volume this year versus last year. Our rates are similar to other lenders in our area.”

West said VyStar views mortgage lending as a “critical part” of its strategy.

“We have offered a no-closing-costs mortgage program, which got immediate attention in the marketplace,” he said. “We use FHLB loans to hedge our balance sheet and we keep most mortgages in our portfolio.”

A mortgage is a “critical product to building a relationship,” West continued.

He said of VyStar members who have a mortgage with the CU, 75% have a second account with the credit union.

“Members with mortgages tend to be in the top 20% of depositors in the credit union,” he said. “Mortgages have gotten us attention in the marketplace, and we have done it with very few foreclosures. We work with people who need a modification and have been successful with that.”


People Are Fans’

Baxter CU’s Valentine said members are “looking for mortgages” in Illinois.

“Credit unions are making a difference in the mortgage lending area, including refis from banks to credit unions,” he assessed. “When they come over, these people are fans because they have a great experience with a credit union. In the last three to four years we have done well thanks to our mortgage business. This year we will do $700 million in mortgages, maybe $1 billion next year. We sell 80% to 85% to Fannie Mae.”

VyStar keeps most of its mortgages on its books, West said. “In the future we will continue to see a mix of portfolio versus selling. Everybody worries about interest rate risk, but so far it is manageable.”

Added Travis CU’s Van Ouwerkerk: “We have a very active ALCO. This year we started to portfolio more loans. We created a HARP program for loans we were portfolioing.”

West said approximately 57% of VyStar’s mortgage activity is in refis. He said the CU is working on getting its branches to supply mortgage applications to members.

“We are developing close relationships with Realtors to pick up more purchase business,” West said. “Some day the refi business is going to end, so we need to be prepared for the future.”


Compliance Burden

VyStar’s West said the compliance burden is “significant,” adding, “The bigger issue is compliance is a burden on the credit union and the members. There has been more training for loan officers, more member communication and more confusion. Servicing rights are now being looked at, which is a concern to me. There is a lot more work to do.”

Baxter CU’s Valentine said compliance is both a burden and a great opportunity. “There is an influx of business coming our way,” he said.

Van Ouwerkerk said Travis CU became so focused on compliance management “stopped thinking about the business for a while. We now talk about enterprise risk management and enterprise opportunity management. It is an attitude we have to work on.”

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