Vince Salinas, VP home loans at the $3.9 billion CU, said the improvement in purchase mortgages is making up for the loss of refis. Through August, Patelco's first mortgage production is 40% ahead of all of 2012.
"We have not seen the drop that many other lenders have, and we are still funding at the same levels as April and May," he said. "Purchase is approaching 30% of funded volume, and we would like that to be a larger share in 2014. By improving jumbo pricing and attracting more volume we have kept our dollars the same.
"Our best eight months ever have occurred in the last 12 months," he added.
In May Patelco, Pleasanton, Calif., improved mortgage pricing, added 30-day rate locks and made changes to its jumbo products, Salinas explained. One addition was an 80/9/11, meaning 80% loan, 9% HELOC or second, and 11% downpayment, on mortgages up to $1.5 million.
"We do jumbos up to 90% up to $850,000, which we thought would lead to more purchase activity given the San Francisco Bay Area has above-average property values," he said.
Promotions and marketing also started in May. Patelco has a "Close on Time Guarantee" or the credit union makes the borrower's first mortgage payment. The limits are 28 days for a purchase, from contract to close, or 18 days for a pre-approved applicant for whom the CU already has checked credit, income and assets.
The bulk of advertising has been on the radio, which Patelco has found to be the most cost-effective media in its market, Salinas noted. It also does keyword advertising and some banner ads on local websites.
"We try to keep it local," Salinas said. "We think that is our niche to promote ourselves as a local decision-maker and the lender that will always service their loans. Even if we sell our long-term, fixed-rate loans, we only sell to Fannie Mae and we always retain servicing."
Patelco uses some third-party vendors for a handful of minor tasks including monitoring of property taxes, he noted, but essentially it handles the entire operation in house. "We like to control the member experience so we try to own as much as possible."
According to Salinas, other credit unions that want to get into the mortgage business need to focus on Realtors.
"Know what they need and expect from their financing partners," he advised. "Whatever the marketplace, establish your shop as the place to go-whether through networking, marketing or product innovation. The run-up in credit union mortgage share has been correlated to refinance. We have done well building that niche, but next step is building credibility for our members and for Realtors when it comes to financing a purchase."
Certainly the increased compliance burden is a consideration, Salinas acknowledged. He said Patelco is spending "an appropriate and meaningful" amount of resources toward meeting the coming deadline for CFPB regulations. "That is a priority that has high visibility at our credit union," he said.
Salinas already sees the overall mortgage industry doing a "better job" of documenting income and "actually documenting" borrowers' ability to repay even ahead of the January implementation date for the official CFPB rule. He said there also is a move to pare back products that were not "appropriate for the masses," such as interest-only or balloon loans.
"I hope we do not see a return to using those products too widely in an effort to get more market share," he declared. "They are not bad products for some people, but they were overused [leading up to the housing crisis]."
CUs can differentiate themselves in the mortgage business, Salinas said, by focusing on the "member experience." He said credit unions can help members understand the requirements and educate them more fully with what happens in the home loan process.
"If the credit union has a relationship with people, it should bear some weight on the underwriting," he said.