Why 'Simple' Matters to Credit Unions
By Tim Mislansky | February 9, 2016
Less than a decade ago, credit unions originated a miniscule 2 percent of all first mortgages. Today, various estimates put our market share at about 10 percent.
Credit unions are member-owned financial institutions, created solely to benefit their members. Each member is required to maintain a “share,” or ownership interest, which is typically a low dollar deposit, perhaps $5, in a savings account.
Credit unions are democratically controlled financial institutions. Each member, whether he has $5 or $50,000 on deposit, gets one vote for the board of directors. Individuals who serve on the board are fellow members and, in all but a few credit unions, are volunteers with no compensation.
While we’re somewhat small in terms of financial institutions, we make a big difference in our members’ financial lives through homeownership. We have moved from financing one in 50 homes in America to one in 10. On a consolidated basis, credit unions would be one of the largest originators in the U.S. even though only about 250 of the nation’s more than 7,000 credit unions have more than $1 billion in assets.
Being member-owned is an advantage: We generally know our members before they apply for a mortgage.
But we also have disadvantages: Our smaller size presents challenges to individual credit unions to spread the increased cost of mortgage regulation and operations over a smaller number of mortgage loans. In addition, we often have more generalists on the mortgage staff than specialized team members. Our folks tend to wear a lot of hats in mortgage lending.
That makes Fannie Mae efforts to be simpler to work with a big deal for credit unions.
- Collateral Underwriter® (CU™) has made the appraisal review process far easier for us. We can quality-check our higher risk appraisals to make better underwriting decisions. The data-rich tool allows us to establish a more comprehensive appraisal review program to limit our risk. It has increased staff confidence on appraisal reviews, thus improving efficiency levels.
- Alternatives to repurchase allow a lender to pay a fee instead of repurchasing, which makes a meaningful difference to credit unions. Administratively, the alternative is far less costly than a repurchase. In addition, the economics of the new method allow us to avoid selling loans in the “scratch and dent market” – saving us up to tens of thousands of dollars.
- Elimination of the Desktop Underwriter® (DU®) fee helps offset some of the increased cost of compliance. While it is a relatively small cost per application, it makes a positive impact on the overall mortgage lending cost structure for credit unions.
- EarlyCheck™ increases the assurance that our loan delivery data is correct. We’ve been able to reduce delivery errors and save re-working time.
- Fannie Mae Connect will create a single source of data and reporting from Fannie Mae. Too often, reports have been sent manually or are available through different entry points. While in its early stages, Fannie Mae Connect shows promise as a way to help us get all our Fannie Mae-related data and analytics in a single, easy-to-use place, saving effort and increasing access to our information.
- HomeReady™ helps more borrowers achieve homeownership. Integration of HomeReady into DU allows us to help more borrowers with a low-down payment option. Before the integration, individual loan originators needed to determine qualification. Some eligible borrowers could have missed out on the pricing and program benefits of MyCommunityMortgage® because an originator did not accurately consider the property for eligibility. We expect to significantly help more borrowers as a result of the integration of HomeReady into DU.
Where Are the Opportunities?
- Quality control is becoming a bigger part of our expense structure. It is certainly a necessity, but not necessarily a value add. How can Fannie Mae help credit unions and all lenders perform this crucial task in a more automated and less labor-intensive manner?
- A single custodian on cash sales should be reevaluated. Could Fannie Mae allow for other options for document custodian services?
- Subservicing oversight is another area of concern among my credit union peers. We all seem to have different understandings of what Fannie Mae expects from us in terms of subservicer oversight and quality control. What can Fannie Mae do to help credit unions gain a better understanding of the requirements for managing a relationship with a subservicer?
Fannie Mae’s requirements, practices and tools have a significant impact on mortgage lending operations.
Credit unions value the focus on simplicity and making it easier to work with Fannie Mae. More efforts toward “simple” will help credit unions become even better mortgage lenders and partners with Fannie Mae.
Tim Mislansky is chief lending officer for Wright-Patt Credit Union and president of its wholly-owned mortgage subsidiary, myCUmortgage. Tim blogs about mortgage lending at www.mortgagesarememberlicious.com.
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