Though the refinance boom is over and several mortgage giants are reeling as originations decline, some credit unions are thriving as they tap into a new source — first-time homebuyers.

In fact, CUs are "uniquely positioned" to attract first-time homebuyers, according to one industry insider.

Tim Mislansky is president of myCUmortgage. He also is senior vice president for $2.8 billion Wright-Patt Credit Union and president of Wright-Patt Financial Group Ltd, a wholly owned subsidiary of the credit union.

"Real estate is local, and credit unions have local ties," Mislansky told Credit Union Journal. "Credit unions have the ability to partner with local groups. Historically, credit unions have been educators. No one is better equipped to help a first-time homebuyer — who might be leery of such a big transaction — than a credit union."

Wright-Patt CU has partnered with the nonprofit Homeownership Center of Greater Dayton. The CU runs seminars for consumers and does joint marketing with the center.

As a result, he said, the CU has become a "trusted lender" for the Center because it helps people obtain housing and retain housing.

"We provide a lot of education on our website. Also, we do not offer any of those ugly products that got people in trouble, such as teaser rates or reverse amortization mortgages," he said. "We get a fair amount of referrals from the center — roughly 10% of our business."

Many credit unions have heard many times that they should build relationships with Realtors if they want increase their purchase mortgage business. But the reality is not that simple.

Mislansky acknowledged that "everyone has heard how important relationships with Realtors are," but then said most Realtors have a lending partner and would only change if something went wrong.

"We want to get in front of first-time homebuyers — most of which are in the millennial age group — before they go to a Realtor, who might try to steer them to a different lender. By going after mortgages with millennials, that leads to ancillary deposits and accounts," he said. "By targeting first-time homebuyers, if the credit union does it right there it will carry over."

Pam Davis, VP, retail lending and deputy chief lending officer for $4.6 billion Delta Community CU in Atlanta, said her credit union has a created a first-time homebuyer program to meet the needs of borrowers who are new to the mortgage marketplace.

Program highlights include: up To 97% financing eligibility; no origination fee; and no private mortgage insurance requirement.

Delta Community has offered the FTHB product since 2010. In the last 12 months it has seen a 50% year-over-year increase in originations, according to Davis.

"We are a community-based lender with a team of mortgage professionals with many years of experience in the industry," she said. "As this has become a key and growing segment of our business, we recently updated our FTHB offering to include a 10/1 ARM product to meet the needs of professionals, growing families and military personnel."

Davis said the goal is to assist members through every stage of their financial lives. "Buying a home — especially a first home — can be a challenging process," she noted. "So we conducted research to find out how we could structure our program to meet our first-time homebuyers' needs."

Prior to interviews with members looking to buy their first house, Delta Community had assumed the interest rate and the term would be the key factors. Instead, research found first-time homebuyers focus on the attributes of the home, such as commute time and the size of the back yard.

"And, they really need advice and guidance on the mortgage process from a financial institution, which they trust will recommend the appropriate lending product," Davis added. "Our home loan specialists devote extra time to work specifically with first-time homebuyers."

To better serve this "significant and growing" segment of borrowers, Davis said Delta Community developed free educational seminars twice a year that review its product offering and feature presentations from local Realtors and closing attorneys.

"The key to success is we have marketed our first-time homebuyer product to real estate agents. And it is priced well," she said. "Also, the fact we did research with first-time homebuyers to find out what they were looking for and what they needed.

"It has been a good product for us. It is exactly where I would expect it to be."

A well-known cliché in real estate is that the three most important factors in the value of a property are location, location, location. In a market that is recovering from an epic crash in many areas of the U.S., today what consumers now need is education, education, education, say industry insiders and experts.

To that end, Bob McKay, EVP and chief operating officer for $1.9 billion Baxter Credit Union, Vernon Hills, Ill., said his institution offers "a ton of education."

"We have seminars and webinars for our members at our various locations," McKay said. "Most of them are geared toward understanding the process, so they are directed toward first-time homebuyers. Many people are locked into really low rates from the refinance boom, so the next five to 10 years the mortgage market will be dominated by millennials coming into the market."

Baxter has partnered with CU Realty to offer a program that gives buyers a rebate. McKay, who also is chairman of the board for the American Credit Union Mortgage Association, said such incentives are another important factor for first-time homebuyers.

Another partnership Baxter CU has formed is with a home improvement expert named Lou Manfredini, who can be heard on WGN Chicago radio as "Mr. Fix It" on Saturday mornings. He also has a syndicated program called "HouseSmarts."

Manfredini jointly produces videos with Baxter for the CU to use on how members can be smarter with their homes.

"This helps make us a trusted source when members are thinking about the home they want to buy," said McKay. "We are viewed as an expert on being a homeowner."

The moves appear to be working. Baxter CU's overall purchase money business is up 30% over last year, McKay said.

"We are really marketing these programs through all of our branches. We started getting our branches involved in mortgages five or six years ago. The branch managers are trained and have goals on mortgage lending."

Approximately 30% of Baxter's mortgage business comes from its branches.

According to McKay, first-time homebuyers do their initial research online, but at some point they want to talk with a live person. "We can do this either on the phone or in person at a branch. Our members are located all across the country, as are our branches."

Another way for CUs to reach out to first-time homebuyers is to be visible in their respective service areas. Wright-Patt's Mislansky said his credit union has a community development loan originator.

"She is the main contact for the economic development arm of the county and the local groups that are involved in housing," he explained. "This gives us a leg up on banks, which are not involved on a local level. We can do community development programs when cities are trying to attract buyers."

Wright-Patt has had a great deal of success with programs such as the Neighborhood Stabilization Program, which began back in 2008-09, he recalled.

Wright-Patt also has developed a 5/5 ARM that only adjusts every five years. Mislansky said this is a balance sheet product designed for people who are not going to live in their home for 30 years.

"It is a better deal financially for those in a starter home who move in 10 years," he said.

WPCU has booked $50 million in loans in just the first four months of the ARM program, which started in May. Mislansky said Wright-Patt priced it "aggressively" because it wanted to show the market it is different from other lenders.

The initial price at first was 2.5%, which WPCU later changed to 2.99%. The adjustment is plus or minus 2%, so worst case is borrowers pay 2.99% for the first five years, then 4.99% for years six through 10.

"For the credit union, because the loan reprices, it helps reduce some of the interest-rate risk," Mislansky said. "I would rather make an investment in my member at 2.99% than to make an investment elsewhere. There is some credit risk, but I am a credit union traditionalist and if I have member deposits I would rather lend them to members."

One of the "major pillars" for Wright-Patt's overall business is mortgage lending, according to Mislansky.

"It helps the community and helps build members' financial pictures. We put a lot of resources and energy into it."

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