Lake Michigan CU grows mortgage business
Even though credit unions have made first and second home mortgage loans for quite some time now, these nonprofit institutions haven’t often been considered as leaders in that field — until now, that is.
A recent ranking from First American Corp., of Santa Ana, Calif., put Lake Michigan Credit Union as the No. 2 lender in Kent County for first mortgages during the first nine months of this year. Over that period, LMCU issued 1,110 loans for a total of $134.2 million and a 9.2 percent share of the first-mortgage market.
Only Fifth Third Mortgage, with an 11.6-percent share, was rated higher by First American Corp. for loans made in Kent County.
“We’re excited about the increase in market share, given that credit has tightened in the industry and some other things have happened. To see us excel as far as growth among our competitors was exciting,” said Michael Winks, senior vice president of lending for LMCU.
Winks said the credit union can track its share of the mortgage market back to 2005, and the current rating is the highest LMCU has had. It’s roughly twice as much as the No. 3 lender in the county. (See related chart.)
Winks said at the end of 2005, LMCU re-engineered its mortgage program to focus on sales and on working with borrowers. So instead of going through the branch network as many lenders do, the credit union developed a sales group exclusively for mortgages.
“To summarize, I would say attractive pricing and programs and the most experienced mortgage team is what we attribute (the growth to). We put those three things together, and we’ve seen that it’s been paying off with our business growth,” said Winks.
The credit union’s mortgage growth hasn’t been hindered by loan defaults, either. Winks said the delinquency rate on first mortgages has stayed near 1 percent. For all lenders in the state, the rate is about 7.5 percent. Remove the bad sub-prime and federally insured home mortgages from the equation and the overall default rate in Michigan is 4.5 percent — four times higher than the LMCU rate.
“The general state of the economy, which has not been strong in Michigan for a long time, is certainly one of the biggest forces in loan performance. But we believe we are growing our business with a high quality book of business. In the loans that we originate, whether they’re in portfolios or otherwise, we focus on the highest quality,” said Winks.
The mortgage business at LMCU has grown by 149 percent in Kent County and by 209 percent in Ottawa County since 2006, the year before the national market began its freefall.
“I think the biggest element is credit unions tend to know their borrower quite well. If you look at a mortgage banker or a larger bank, their origination sources might vary and might have separate channels, and they’re working with borrowers that are very much outside of their branch footprint,” offered Winks.
“I think that tends to make a difference overall in the credit quality of a credit union’s assets versus others.”
Winks said mortgage insurers offer credit unions lower-cost premiums than banks and other lenders, because mortgages issued by credit unions consistently perform better and have fewer defaults. After joining Lake Michigan a few years ago, he said he noticed that brand loyalty is much stronger among credit-union borrowers who are also members than among borrowers of other financial institutions.
“I think it’s a sense of ownership,” said Winks.
“My personal opinion, if I can summarize it, is credit unions generally don’t end up with loan assets that are originated by brokers. Not all brokers are bad, but I think that’s a major part of the improved credit quality in the credit-union arena versus the banking arena.”
Despite the current condition of the housing and lending markets, Winks felt LMCU would continue to be an active mortgage lender next year — one that will be focused on growing its market share in the local industry even more.
“My crystal ball on the economy is: I am optimistic that there is opportunity. Credit standards have tightened in the mortgage industry, but financing is still available and we still have a lot of great products that folks can utilize to buy a home or refinance,” he said of the industry in general.
“I think that specific to Lake Michigan, we intend to retain and attract the best mortgage talent. So for next year, I’m very optimistic that we’ll continue to grow.”