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Credit Unions Open Mortgage CUSO In Grand Rapids
But Member First Mortgage is the first mortgage credit union service organization (CUSO) in Grand Rapids.
The firm, located at 4398 Roger B. Chaffee Boulevard, is a full-service mortgage company owned by Steelcase Employees Credit Union, LSi Credit Union and Bay Winds Federal Credit Union of Charlevoix.
The three credit unions formed the limited liability corporation last September and Member First opened its doors in early February.
The company offers first mortgages for home purchase, refinance and new home construction not only to members of all three credit unions, but also to affiliate credit union members and the general public.
A credit union service organization is required to do 51 percent of its business with affiliated sources — either the owners or affiliated credit unions. The remaining 49 percent can be drawn from the general public, said Cory Mackwood, Member First president and CEO.
“Obviously our primary purpose is to serve our credit unions and their members, but a way you do that sometimes is by creating relationships with people that are not credit union members,” he said. “Even though we don’t require that they join a credit union to do business with us, many people do end up deciding to join just because they see the benefits.”
Steelcase Employees Credit Union, chartered in 1967, has 17,000 West Michigan members. LSi Credit Union, chartered in 1951, has more than 18,000 members and serves employees of more than 500 organizations in metro Grand Rapids. Bay Winds Federal Credit Union of Charlevoix has 9,800 members and serves anyone living in Antrim, Charlevoix and Emmet counties.
Seven other credit unions have since affiliated with Member First, among them Bissell Employees Credit Union in Grand Rapids, Tri-Cities Credit Union in Grand Haven, Shoreline Federal Credit Union in Muskegon and Newaygo County Service Employees Credit Union in Fremont.
There are three different levels of involvement for Member First affiliates, and the more involvement an affiliate has with the application processing, the more compensation it gets from Member First, spokesperson Jay Dressander pointed out.
Member First could even take on additional owners over time if some other credit unions are deemed a good fit for the company at an ownership level, Mackwood said.
He said Grand Rapids was chosen as company headquarters primarily because two of the three owner credit unions are located here.
Mackwood markets and manages Member First for its owners and is approaching other credit unions to gauge their interest in joining. He formerly headed Credit Union Mortgage Co. in Kalamazoo, which grew to become the 12th largest CUSO in the country and the sixth largest mortgage CUSO.
Member First follows a similar model but employs more use of technology, he said. For instance, members can apply for a mortgage online anywhere in the world.
As chartered years ago, credit unions were primarily single field of membership organizations built by a particular employer to serve its employees. Some have now expanded their charters and field of membership so they can do business with more and more people that live and work around their facilities, Mackwood explained.
Most credit unions are beginning to offer some form of mortgage lending, even if it’s only home equity lending, he noted.
“Most credit unions are starting to see the need because it is such a primary financial product for their target market. And most, because of their size, would have a hard time doing it directly themselves.”
In Michigan the average size of a credit union is about $50 million to $60 million, which is a really, really small community bank, he said. Mortgage lending can be a sophisticated business and expensive to get into, making it difficult for most credit unions to offer all the mortgage products and services their clients might want.
“So more and more credit unions are seeing the need to affiliate with somebody to do that for them. A CUSO is the best way to do that because we’re within the system and, like them, focused on the not-for-profit concept.”
Even though a CUSO is a for-profit entity, he pointed out, all profits generated are returned back to the credit unions to be used for their development and services.
By grouping together as the Steelcase, LSi and Bay Winds credit unions have done, credit unions can take advantage of the operational efficiencies, Mackwood said.
Small credit unions typically wouldn’t have the capacity to offer the same level of mortgage services as Member First or its competitors, he added. But as an affiliate, they can offer their members a full range of mortgage products and it doesn’t cost them anything to be involved in the organization.
Furthermore, as a CUSO, Member First doesn’t cross sell any other financial products or services. Unlike the competing bank down the street, the CUSO doesn’t offer products such as checking accounts and credit cards — the kinds of things that could pull the credit unions’ members away from them, Mackwood explained.
Since a mortgage CUSO is in the credit union system, there are several things that differentiate it from other mortgage lenders, such as paying interest on escrow. The mortgage industry only does that in states where it’s required by law, and Michigan isn’t one of them.
“We pay the interest not because we have to, but because it’s more in line with the credit union philosophy,” Mackwood said.
“We service the loan for life; we don’t sell the servicing, so the member will always be doing business with us. Very commonly in mortgage lending these days, the originating lender is usually not the one who ends up collecting payments and having the relationship with the client.”
Member First is a low-cost provider in terms of fees, Mackwood said. Even though it’s a small company, it competes on price with a lot of large companies. A lot of smaller lenders have to charge some of the fees because they have a different profit motive, he added.
“Our profit motive, while it’s there, is not quite as strong as what it would be if we were not within the credit union business paradigm.
“In mortgage lending we can provide the personal service a little bit better because we’re more focused on spending our dollars on providing service where others are looking more for operational efficiencies.”