While most CU executives are worried about the new Consumer Financial Protection Bureau's new mortgage regulations, one CEO thinks those fear-inducing rules will actually present a "big opportunity" for credit unions.
With implementation of the qualified mortgage rules just four months away, Redwood CU CEO Brett Martinez told ACUMA conference attendees in Las Vegas that he believes credit unions can leverage the banker response to those rules to their advantage.
"The regulation is not a big deal to us," said the CEO of the $2.2-billion-asset credit union based in Santa Rosa, Calif. "Our goal is to help our members. When we read what Wells Fargo and other big banks are going to do, we see an opportunity."
While speaking on a panel of credit union CEOs, Martinez said mortgages comprise 45% of Redwood's lending. The CU holds in its portfolio adjustable-rate mortgages and sells off most of its fixed-rates.
During a panel of chief financial officers, Tom Moore, EVP/CFO for $1.8 billion Baxter Credit Union, Vernon Hills, Ill., noted his CU has a large number of jumbo mortgages on its books. When asked how the finance and lending departments of credit unions need to work together to comply with the QM rule, Moore said he wants to make sure the loans on the portfolio do not become the "island of misfit toys."
"We will continue to make non-QM-type loans, but we will have a mindset of watching ALM and the balance sheet," he said.
One buzzworthy moment occurred during a discussion of innovative ways to increase mortgage market share. Richard Morris, VP pricing/GSE relationships for $54 billion Navy FCU, Vienna, Va., was responding to a question about the QM and ability to repay rules possibly placing credit unions in a position of not being able to help their members. Morris began by stating Navy Federal believes in “good, old-fashioned underwriting,” and, in fact, is looking for ways to make more non-QM loans.
“One example—and I do not want to make anybody shout—is the interest-only loan for the right type of borrower,” he said. “We see this as helping people who cannot get a loan elsewhere.”
Speaking during the same session with Morris was Joe Brancucci, president and CEO of $1.6-billion-asset GTE Financial, Tampa, Fla. Brancucci said as an industry, credit unions have made sure to put their members in the “right loan in the right house” and did not steer people into a $500,000 house when all they could afford was $250,000.
“We are going to document income anyway,” he insisted. “The QM rule will only affect a very small number of loans credit unions make.”
Morris and Brancucci said their two CUs are putting an emphasis on the first-time homebuyer market.
According to Navy Federal’s Morris, the biggest barrier for new homebuyers is a lack of a downpayment.
“Nobody has cash,” he said. “We give them handholding, meaning special attention all the way through the process. They want to know they are approved before they go out and shop, and the Realtors want to know they can get the financing.”
Navy Federal has a guaranteed rate match program, offers up to $2,500 in closing costs assistance, and has dedicated a special part of its website for first time homebuyers, he added.
Brancucci said when he joined GTE after many years with BECU the credit union was “missing a couple of products,” including those to support first time homebuyers.
“It is important to do granular analysis, which helps with pricing,” he said. “We offer Harmony Loans, which allows people to adjust rates.”
