Credit Union Mortgage Lending: A Unique Success Story

The following is an excerpt from Chapter 4 of Volume I of The Mortgage Professional's Handbook:


B. Dan Berger, President and CEO
National Association of Federal Credit Unions

Because credit unions historically have done little advertising, their members have not always been aware that they offer mortgages. That’s been changing in recent years as credit unions have stepped up their marketing and consumer activists have touted the value of credit unions through events such as “Bank Transfer Day.”

Credit unions are reaching out to their fields of membership and communities to educate them on credit union services. Debra Schwartz, president and CEO of Mission Federal Credit Union in San Diego, feels her $2.8 billion credit union’s strength lies in its strong ties to the community.

“I think we actually have an advantage because we are so local,” Schwartz says. “We only serve the community of San Diego, so we can focus exclusively on that market. Our members know where we are, and they know we’re always going to be there for them if they have a concern or question about their mortgage.”

Schwartz says her credit union is making a concerted effort to connect with first-time homebuyers. “Our first-time homebuyer seminars have been very well received. It helps them understand how the application process works, how much they can afford and what to expect,” she says. At the same time, the credit union is targeting local realtors for outreach to create awareness and build stronger relationships.

Mission Federal Credit Union is also pushing its mortgage program out to its 30 branches. “We had been very centralized prior to 2008,” Schwartz says. “Now we’ve trained a significant number of our branch employees to be mortgage loan officers. Underwriting and processing is still centralized, but we have a lot more knowledge on the front end now. You don’t get handed off to someone else or told to call a phone number.”

Schwartz says it took awhile for the credit union to hire the right staff and to get everyone certified, but “it’s made a huge difference in our production. It’s exponentially greater.” In addition, “we’ve set mortgage production goals for each branch. We now offer a full suite of mortgage products.”

Mission Federal Credit Union now originates $350 million to $585 million in new mortgages a year, including refi’s, but personal service remains the hallmark of the program. “I personally check the turn times on our loans,” Schwartz says. “I see the member complaints. If there is a service failure, they often will get a personal letter and/or a gift card from me. It’s important to acknowledge if we haven’t met expectations.”

TDECU’s Smith says that credit unions are taking an omnichannel approach to mortgage sales and servicing. “However the member wants to apply for a loan, we try to be available,” he says. “Probably a third of our branches have mortgage loan officers, and they also cover other branches that are nearby. Members can start on the Internet, on the phone, or go to the branch—however they want to do it. We now have Saturday coverage for members who are looking at houses on the weekend.”

PrimeWay Federal Credit Union is making inroads by customizing loans to its market and members. The $449 million community credit union serves the greater Houston area, one of the fastest-growing housing markets in the U.S. PrimeWay Federal Credit Union President and CEO Annette Zimmerman says the credit union works with members to pre-approve them for loans because the housing market is so tight. It also is offering hybrid loans that combine the features of a mortgage with a home improvement loan.

“In our area, swimming pools and outdoor kitchens are very popular,” she explains. “We’ll do a purchase mortgage loan and include the improvement project in the balance based on the estimated value of the completed project. The funds for the improvements are disbursed upon completion.”

Credit unions are also building more efficient processing systems, modernizing their core systems, and reducing their mortgage turn times. Plus, they are building frequent member communication into the loan process so borrowers aren’t left wondering where they are in the pipeline. “People don’t like to be surprised,” Smith notes. “We keep our members informed about their loan as it goes through the process, and our members are always thanking us for that.” Smith says the turnaround time for purchase loans at TDECU is now running as low as 24 days, well below the industry average of 40 days or more.

SAC Federal Credit Union in Omaha, NE, has been selling mortgages for about 15 years and just converted to a new core system. “We’ve gained a lot of efficiency,” says SAC Federal Credit Union President and CEO Gail DeBoer. With the new system, SAC’s 24 branches are connected to the same back-end system, allowing it to originate more mortgages with the same number of employees.

SAC Federal Credit Union Vice President of Business Lending Alan Stoltenberg, who helped build the credit union’s mortgage program from its inception, sees technology and automation as keys to the credit union’s mortgage growth. “Updating our processing system gave us the foundation to grow,” he says. “Now we can take a loan application on a laptop and it is automatically entered into our system.”

Sue Mohr, SAC Federal Credit Union’s vice president of mortgage lending, says that digital technology is providing added convenience to members and helping the credit union reach younger homebuyers. “Social media, blogging, and live-streaming mortgage webinars are all tools that we are using to reach our members, especially millennials and Gen X,” she says.

The $775 million credit union serves the Omaha community, but it retains its roots as a defense credit union. “The military has a strong presence in this area,” DeBoer explains, “and we have branches on base. We are also known as the ‘go-to’ experts on VA loans. I’d say we have a lock on that.” In fact, SAC Federal Credit Union still does about 50 percent VA loans.

According to Mohr, the credit union is also offering other niche products to further differentiate itself in the Omaha market. One of those is a conventional 3-percent-down program marketed as an alternative to Federal Housing Administration loans. It has no upfront private mortgage insurance requirement. “We’re trying to be creative,” she says of this offering and the fact that SAC Federal Credit Union is one of the few lenders catering to Omaha’s growing downtown condo market.

Like most credit unions, SAC Federal Credit Union retains the servicing of its loans, and that becomes a strong reason for members to choose them over other lenders. “I think people do care about the servicing,” DeBoer says. “That became very apparent during the mortgage crisis. People didn’t even know who had their loan. We want to take care of our members. We don’t want anyone else to handle it. We’re known as a trusted financial partner and for providing incredible member service.”

Read the rest of this chapter in The Mortgage Professional's Handbook!

B. Dan Berger is president and CEO of the National Association of Federal Credit Unions (NAFCU), a post he has held since Aug. 1, 2013. He is NAFCU's chief advocate before Congress, the White House and federal regulatory agencies.With more than 25 years of government relations and political affairs experience, Berger has held key association and business management positions and has served as chief of staff in the U.S. House of Representatives.

For 13 consecutive years, Berger has been listed as one of the most influential lobbyists in Washington, D.C., by The Hill newspaper. He has been a commentator on Fox News, CNBC and CNN, and is quoted regularly in the Wall Street Journal, The Washington Post and other financial industry publications.

He earned a master's degree in public administration from Harvard University and a bachelor of science in economics from Florida State University. He serves on the Florida State University Alumni Association's National Board of Directors, appointed by FSU President John Thrasher, and was an adjunct professor at The George Washington University in the communications department.

Berger is an outdoor enthusiast and enjoys spending time with his wife, Aimee, and daughter, Shelby.