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Mortgage Lending:

Is Now the Time for You?

Spring Training Conference 2011

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AGENDA

• Why Now?

• The Mortgage Market - Historically

• The Mortgage Market – Today

• Mortgage Processes – Maximizing to Compete

• Credit Union Benefits

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Why Now?

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Target Field and Downtown

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Be Like Warren

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OCCU Newsletter – Mandy Jones2010 was an extraordinary year at Oregon Community Credit Union.

Reeling from the effects of the worst economic recession since the Great Depression, members gave us the opportunity to help them in record numbers.

For example, in the first ten months of 2010 we refinanced 332 mortgages, saving each family an estimated 1% on their interest rate as well as reducing monthly payments by $100! We estimate these members will save $8 million in total interest over the 20 year life of these loans.

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A “Real Number” Example

• 2000 Purchase of $300,000 home

• 5% down: Finance $285,000

• 30 year fixed rate at 6%

• P & I payment = $1,708.72

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Home Value

• 2001– 12% increase - $336,000

• 2002 – 8% increase - $362,880

• 2003 – 12% increase - $406,425

• 2010 – value back at 2003 levels

• 2010 balance on loan = $238,504

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Refinance Opportunity

• Loan Balance - $238,504

• Loan to Value – 58.68%

• Interest rate – 4%

• 15 year fixed rate payment $1764.19

• 20 year fixed rate payment = $1476.90 (4.25%)

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Equation for Success

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Equation for Success

•Market Opportunity + Technology +Marketing

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Historical Mortgage Market

• Term: 30 years

• Downpayment: 20%

• Interest Rate: 8%

• Dominated by S & L’s

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Historical Mortgage Market

• Credit Union Mortgage Market Share

• 1996 – 2% of the mortgage market

• This, after 30 years of mortgage lending

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Current Mortgage Market

• Brokers influence reduced

• Refinancing opportunities abound

• Housing prices have been reduced

• Government programs have been/will be available

• The baby boomers and reverse mortgages

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Mortgage Bankers Association Forecast

• 2009

• Originations – $2.12 Trillion

• Refinancings – 65%

• CU Origination – $90 Billion

• CU Percent – 4.25%

• 2010

• Originations - $1.278 Trillion

• Refinancings – 39%

• CU Originations - $51.1 Billion

• CU Percent 4.0%

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ACUMA Forecast

• 5%

• How do we get to 10% faster than we got to 5%?

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Mortgage Market Today

• Callahan – 9/1/09 – Credit unions captured 5.2% of the first mortgage market Kept lending during down turn

Refinanced others troubled mortgages

• 53% of all credit union loans are mortgages - June 30, 2009

• 2008-2009 – 1/3 of new mortgages were to existing members getting mortgage for first time at Credit Union

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Real Life Examples

• Truliant Credit Union, N.C. Dec. 09 vs. Dec 08 – 32% increase in closing

Competitive rates; affordability; real estate professionals contact

• Louisiana Federal Credit Union, LA. 2004 to 2009 – tripled its volume

2 person staff – no increase in staffing

Web based application

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Real Life Examples

• Ohio Credit Union League (CUNA News Now) 2009 – first six months – 50.2% increase in mortgage

originations

First increase in membership in 5 years

• TruHome Solutions cuts origination fee by 20% August 2009 – purchase volume steadily increasing

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Real Life Examples

• Baxter Credit Union Reaches $1 billion in mortgage servicing in 8 years

“Mortgage lending is paramount to BCU and our vision of becoming the primary financial institution for our members,” said Mike Valentine, CEO

Started as a referral program

Gradually added portfolio capability

Added full mortgage origination platform

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Real Life Examples

• First Credit Union, Appleton, WI July, 2008

Close to 20% Market Share

5 and 10 year portfolio products

Marketing, including radio, newspaper and realtors

Must have checking with direct deposit

Close to 5 services per member

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Mortgage Opportunities Today

• First Mortgages – increasing homeownership rate in youngest member group

• Modifications

• Refinancings

• Reverse mortgages – 5500 boomers turn 62 each day

• Low cost deposits are available for funding

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Mortgage Opportunities Today

• Realistic underwriting standards

• Existing members

• 90% of the work force is employed

• Realtor Network

• Lower home prices

• Government programs

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THE MORTGAGE PROCESS

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Mortgage Process Today

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Mortgage Process Today• One vendor for web applications

• One vendor for branch applications

• One vendor for application disclosure documents

• One vendor for closing software (LOS)

• One vendor for closing contract and disclosure documents

• One vendor for forms mapping

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Ask yourself these questions:

• What do I pay to license the mortgage documents?

• What is the cost of the time involved in setting up the correct documents for each loan in the system, and is that selection “guaranteed”?

• What is the cost of the time to test the system once a change is made in the documents to be used?

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Ask yourself these questions:

• What do I pay to map/integrate the documents to my software systems?

• What is my “wait time” to get new/changed documents into the system, and what is the cost to handle those documents between my document supplier and my software supplier?

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Mortgage process tomorrow

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Getting Started/Growing

• Referral program or inhouse

• Product suite

• Technology

• Marketing

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REFERRAL OR INHOUSE??

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Product Suite

• First Mortgages Fixed Rate – 30 year fixed rate - dead or on life

support; no more than 15 years

Adjustable Rate – 1 and 3 year ARMS

• Home Equity Through your open end, multiple advance program

Closed end, fixed rate

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Product Suite

• Modifications

• Government programs

• Refinancings

• Reverse Mortgages

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Mortgage Technology

• In house

• CUSO

• Multiple vendor issue

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Technology

• In house WKFS

Harland

Core providers

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Technology

• Web Services MRG Documents

Mortgage.bot

MeridianLink

Calyx

pcLender

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Technology

• CUSOs Prime Alliance

CU Companies

Wright-Patt Financial

CU Members Mortgage

State Financial Network

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Mortgage Technology Benefits

• Cost savings

• Efficiencies

• Process more with less

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MARKETING

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What you don’t want to be!

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Marketing What worked for others?

• Radio

• Newspaper

• Realtor Network

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Credit Union Benefits

• Help your members – Isn’t that what the Credit Union Movement is all about?

• Make more loans – increase assets

• Multiply the number of relationships per member

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Thank You

• Questions and Answers?

• Gary Hess, President

• RTE Financial Services, LLC

• 320-281-9765

• Gary.hess@rtefs.com