MFM Makes Major Expansion

August 15, 2003
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GRAND RAPIDS — Member First Mortgage LLC has been riding a big growth wave over the past 18 months.

When Member First opened its doors in February 2002, it represented three credit unions with $200 million in assets and about 45,000 members collectively. The founding partners were Steelcase Employees Credit Union, LSI Credit Union and Bay Winds Federal Credit Union of Charlevoix.

Today it has eight credit union owner/partners, a dozen affiliate credit unions, more than 300,000 members statewide and assets in excess of $1.5 billion.

Cory Mackwood, president and CEO, predicts that by the end of the year, Member First will represent five to seven more credit unions.

It's still the only Grand Rapids-based credit union service organization (CUSO), a subsidiary company set up and cooperatively owned by several credit unions. It also remains the only CUSO on the west side of the state.

Membership increased by 100,000 members recently with the addition of three more owner/partners — Research Federal Credit Union and METRO Credit Union, both of Warren, Mich., and Troy-based Oakland Catholic Credit Union.

Even though a CUSO is a for-profit entity, Mackwood pointed out, all profits generated are returned back to the credit union partners to be used for development and services.

Affiliate credit unions don't pay dues or fees to participate. But since they don't share in the risks associated with owning the company, they don't share in the profits. They are, however, compensated for their level of involvement in the mortgage process.

Affiliates are typically smaller credit unions unable to compete with local banks and mortgage companies in providing mortgage-lending services, Mackwood explained. Affiliating with a CUSO gives their members access to competitive products and services.

Member First started with four full-time and one part-time employee nearly 18 months ago and now employs 19 full-time and four part-time people.

The organization recently moved from its 3,800-square-foot facility on Roger B. Chaffee Drive to a 9,000-square-foot facility at 616 44th St.. The building has an extra 9,000 square feet of unfinished space that the organization will grow into, Mackwood noted.

Additionally, Member First recently opened a title company, Member First Title Agency, and plans to open a real estate brokerage operation sometime next year.

"That makes us more attractive for our institutional partners, obviously, because we're capturing one more service and product for their membership. It will be very attractive to our membership because it will be one-stop shopping as it relates to selling, purchasing or financing a home and everything that goes along with it."

Member First also just established a holding company that will oversee its subsidiaries. Restructuring of the entity creates more opportunity for ownership, Mackwood added. He attributes the organization's rapid growth to "being good and being lucky at the same time."

He said Member First has a model that is different from most of its competitors.

"We have a real heightened level of technology that was built last year, when most of our competitors were built 10 to 12 years ago. So we have a model that is much more advanced. As such, a lot of the larger credit union partners around the state liked what they saw in comparison."

What has helped boost growth is the fact that a lot of credit unions, even some fair-sized credit unions in Michigan, still don't have fully developed mortgage products, Mackwood said. And over the last year, as interest rates have declined to 45-year lows, credit union members have been seeking mortgage products.

"That has really made them aware that this is an Achilles heel for them," Mackwood remarked. "They were looking to fill that gap, and we happened to be built at the right time when they were looking to fill that gap, and many are still looking to fill that gap. That was the good timing part that was sort of the luck of the market."

Most other CUSOs are regional in their approach, he observed. Member First is not just a Grand Rapids company — it's committed to the entire state, he said. I's ownership stretches from Charlevoix to Grand Rapids, to metro Detroit to Lansing.

"We cover the entire state with our partnerships so that people recognize this isn't just a Grand Rapids thing. We just felt Grand Rapids was the best place to be in terms of our home base."

Member First has been aggressively marketing its services and is signing up affiliates almost weekly, Mackwood said. He expects to announce in the next three months some new credit union affiliates that are located in areas where the organization does not yet have a presence.

His marketing director, for instance, is spending a lot of time in places like Buchanan, Flint, Port Huron and Jackson. Of the roughly 400 credit unions statewide, Member First officials have identified about 113 they feel would be a "good fit."

A good fit is a credit union that desires to have mortgage lending as a core product, Mackwood said. Geography is important, as well.

"Even though our home base will always be Grand Rapids, we think that we should have base operations in other parts of the state because certain parts of the state experience both upturns and downturns in terms of their economic stability at different times. We want to be a strong company that can withstand difficult times."

Other factors include the financial stability and growth opportunity of the potential credit union partner or affiliate, he added.

A CUSO has to do 51 percent of its business with either partners or affiliates. The remaining 49 percent can be drawn from the general public, Mackwood said. He said Member First does a number of mortgage transactions every month with nonmembers, but that Member First has spent most of its time over the past 18 months focusing on making itself and its products known to credit unions.

"We wanted to make sure that those people we know are uniquely interested in our product are aware of it first. Once we feel we have saturated that, we will certainly look at the general marketplace."

Mackwood anticipates the organization's growth will continue to be aggressive over the next 12 to 18 months and that by this time next year it will represent about a half-million members. He said even if mortgage activity diminishes due to interest rate hikes, Member First "will still be looking at a serious amount of production."

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