Fourth Annual Meeting Summary
This year’s Credit Union Housing RoundTable Meeting, our fourth annual, had just under 50 people in attendance, a strong showing in this difficult economy and, perhaps, an indication that we are on our way to recovery.
Summary
Participants at this year’s meeting considered three main topics. First, the First-Time Homebuyer Credit that expires on December 1, 2009. There was consensus the credit should be extended, and we should write our Representatives encouraging them to do so.
Second, we explored the potential changing nature of credit union balance sheets as we move closer to 10% market share. During a group exercise, participants modeled credit union balance sheets from now through 2016, the year in which we will achieve 10% market share. The results are telling.
Third, Reverse Mortgage Lending, a topic first taken up by the RoundTable in 2007, was expanded on in a new White Paper. Eric Bachman, CEO and Founder of Golden Gateway Financial, Tom Walker, President and CEO of Members Trust Company and Dan Green of Prime Alliance wrote this year’s paper, approaching reverse mortgage lending from the perspective of the member, the credit union and the market.
You’ll find more information on all three topics below, plus I’ve enclosed this year’s White Papers. We hope you’ll find them useful strategic planning tools.
Write your Congressman, Write your Congresswoman
At the close of the meeting on Wednesday morning we discussed the importance of the First-Time Homebuyer Credit. Various news sources attribute 30% to 40% of home sales this year to this incentive. As we all know, it expires on December 1.
We’ve done some checking. Depending on the day, there’s a better than even chance the credit will be extended for those who were out of the country this year. There’s a chance it could also be extended through mid-year 2010. It was mentioned at CNNMoney.com on October 21 in the article, Like it or not, here comes more stimulus. We believe the credit, as it stands, should be extended. If you feel the same, make your opinion heard. Write your Representative and your Senators today. If Congress moves to extend and/or enhance the credit, it will be an eleventh hour action, an action that could be encouraged by your letter. Obviously personal letters written individually get much more attention than ‘cookie cutter’ form letters. By using the information provided above and following a simple three paragraph, one page approach recommended by many Political Action Committees, we can help focus our lawmakers on extending the credit before it expires December 1, 2009. Please consider writing.
The recommended three-paragraph approach is:
1. Say why you are writing and who you are. List your “credentials.” (If you want a response, you must include your name and address, even when using email.)
2. Provide more detail. Be factual not emotional. Provide specific rather than general information about how the topic affects you and others. If a certain bill is involved, cite the correct title or number whenever possible.
3. Close by requesting the action you want taken: a vote for or against a bill, or change in general.
When addressing letters, use the following format and salutations:
To Your Senators:
The Honorable (full name)
(Room #) (Name) Senate Office Building
United States Senate
Washington, DC 20510
Dear Senator:
To Your Representative:
The Honorable (full name)
(Room #) (Name) House Office Building
United States House of Representatives
Washington, DC 20515
Dear Representative:
White Papers
This year’s white papers, Challenging the Financial Models and Mortgage Lending in Reverse are available on the publications section of the CU Housing RoundTable Website (www.cuhousingroundtable.com). The five previous papers may be found there as well.
Challenging the Financial Models
We learned from the modeling exercise that the composition of the credit union balance sheets could change significantly if our industry achieves 10% market share and if more than 50% of loans are retained in portfolio. (Challenging the Financial Models, this year’s paper on the subject, illustrates the results of the exercise.) Nothing needs to change, of course, if credit unions are willing and able to sell approximately 70% of loans originated to the secondary market or other investors. In addition to keeping our balance sheets more or less historically consistent, there may be another good reason to sell a high percentage of loans. Tom Farin cited, during his presentation at the ACUMA Meeting, a Proposed Interagency (OTS, OCC, FDIC, FRB, NCUA) Guidance on Funding and Liquidity Risk that suggests sound liquidity practices which would include keeping a concentration of assets in highly marketable securities.
This year’s exercise looked at the balance sheet implications of Two to Ten. Our next step is to look at the Big, Hairy, Audacious Goal from the perspective of the member. We’d like to begin the process during this year’s Lending Council Conference, either Sunday, November 1, immediately following the golf tournament and before the reception, or Wednesday afternoon, November 4, after the meeting ends, from 1 pm to 5 pm. All are welcome. If you are interested in participating, please email Dan Green at dgreen@cuhousingroundtable.com.
Mortgage Lending in Reverse
Wednesday morning was spent on Reverse Mortgage Lending. Eric Bachman, CEO and Founder of Golden Gateway Financial, presented an overview of the subject, including why this product is important and important to credit unions, understanding the product and the market and options for entering the reverse mortgage arena. Our group exercise consisted of four questions, reprinted here with their answers:
1. Are any of the reverse mortgage lenders (i.e., Wells, BofA) serious contenders for the depository relationships of your senior members?
Yes, they are. Realistically, though, what can they do with them? Seniors are not necessarily cross-selling candidates. Therefore, we don’t see the true drive to take the relationship. Credit unions, however, should take control of the reverse mortgage process. Credit unions have sold service-released for years (forward mortgages), and members are cross-sold. It’s up to the credit union to build the relationship. Credit unions should, however, maintain as many touch points with members as possible. Yes, the big banks are serious contenders for member relationships. The key, though, is quality member service. Yes, the biggest banks want relationships with our members. Fannie Mae is a large buyer of reverse mortgages. As Fannie is shrinking their portfolios, this will become a bigger issue and could force credit unions to work with the large banks for this product.
2. How could you use reverse mortgages to attract new members?
Our group didn’t see reverse mortgages, at least at the moment, as an attractor for new members. They are, however, a good member retention tool. This tool can be used to attract new members. Reverse mortgages can and are being used to attract new members. Moreover, reverse mortgages are as effective as an attractor as forward mortgages. Credit unions have an aging demographic, so reverse mortgages are a good retention tool. Marketing reverse mortgages to the boomer demographic is important since they are not only the market of the future for reverse loans, they are also the trusted advisor for aging parents. Reverse mortgages could be used with aging SEGs as an attractor.
3. Could you use reverse mortgages as part of your wealth management or retirement planning tools?
Yes, but only very carefully. Some financial planners are against using reverse mortgages as a financial planning tool. Planners are opposed because they feel their job is building wealth; reverse mortgages don’t build wealth. Yes. Reverse mortgages could be used as a consolidation tool as well as a financial planning tool for income shortfall and enhancement.
4. If reverse mortgages make sense for you as a product offering, what would your short-and long-term goals be (revenue, market positioning, portfolio, etc.) for the product and customer segment?
Short-term goal is awareness advertising. We also have to look at how reverse mortgages fit on the balance sheet. Both short-term and long-term, credit unions should do this now because members need them. Our memberships and the population are aging. It is important to help members build additional income sources. Reverse mortgages should also be seen as a revenue source for credit unions. Credit unions must have a full suite of mortgage products, which includes reverse mortgages. This helps prove to our members and communities that mortgage lending is strategically important to credit unions. In the short-term reverse mortgages are important for member service. Credit unions need a better understanding of reverses as a financial instrument for balance sheet investment.
Credit Union Loan Performance
Chip Filson shared credit union loan performance data for first and second quarter 2009 compared with the same periods one year ago. While delinquencies and foreclosures are up versus the same period one year ago, overall loan performance remains strong. As the accompanying graphic illustrates credit union loan assets continue to outperform those of our competitors. The information Mr. Filson shared can be found here.
Thank you for your interest. The Housing RoundTable is an all-volunteer effort that succeeds on our collective ideas. We’re looking forward to working with you on this year’s projects, as we make our way to our fifth anniversary.
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