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Nation’s fifth-largest CU mortgage originator located here

Lake Michigan Credit Union claims West Michigan firsts in size and mortgages.

November 22, 2013
| By Pete Daly |
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Nation's fifth-largest CU mortgage
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Now in its 80th year, Lake Michigan Credit Union has announced it is the largest financial institution headquartered in West Michigan and also the region’s largest mortgage originator. It also just expanded its charter, allowing it to serve people living in every county in Michigan’s Lower Peninsula.

“We used to be just western Michigan,” said LMCU president/CEO Sandy Jelinski, who wrote about the growth in her Oct. 28 newsletter. 

LMCU was originally called Grand Rapids Teachers Credit Union, organized by Grand Rapids teacher Lloyd F. Hutt in 1933 and operated out of his home with help from 13 other teachers who wanted to do something about the lack of loans available to them.

Mergers with numerous other credit unions in West Michigan led to the adoption of the Lake Michigan Credit Union name in 2002. By 2010, total assets had reached $2 billion.

Four or five years ago, when many battered banks were shying away from the mortgage market, “we got into it” in a much bigger way than LMCU had ever been, said Jelinski.

“And we didn’t have any problem mortgages,” she added.

LMCU came into it at the right time, she said, “when the whole industry was suffering and home values had (bottomed out). But we were there to help our residents.” 

“Word spreads, and people came to us for their mortgage needs,” she said, adding that LMCU has a low rate guarantee on its mortgages.

LMCU owns $2.9 billion in mortgage assets and services $4.2 billion worth of mortgages it originated but sold to investors or government agencies Fannie Mae and Freddie Mac. 

Jelinski said LMCU sells the majority of its mortgages because of the risk of fluctuating interest rates, as do many mortgage institutions. However, LMCU never sells a mortgage “service released,” which means it always retains servicing the mortgages it sells, a source of revenue “which does separate us from a lot of the people in this business.”

According to Eric Burgoon, senior vice president of mortgage lending at LMCU, it services about $5.5 billion, or about 29,000 mortgage loans.

“We are the fifth largest credit union mortgage company,” said Burgoon, adding that the four larger are two in the Washington, D.C., area, and two in California.

LMCU does double the mortgage business of its next closest competitor, which in Kent County is Fifth Third Bank, according to Burgoon. He said LMCU market share for purchase mortgages (as opposed to refinanced mortgages) ranges from about 17 percent to 23 percent.

“It’s a good market,” he stated. LMCU’s major mortgage competitors include Fifth Third, Chemical, Huntington, Kalamazoo’s First Place Bank and Wells Fargo.

“Fifth Third is certainly the one player that’s in all those markets. While they may not always be second, they are in the top three or four pretty consistently,” said Burgoon, who used to work for Fifth Third.

Most of LMCU’s mortgage business is in the Lower Peninsula, but it does have some members with mortgages on second homes in other states around Michigan.

“We are very positive on the real estate outlook. We are seeing a renewed interest in construction lending,” said Burgoon. 

LMCU’s strategy is to focus on home purchase mortgages as opposed to refinanced mortgages. “It’s easy to get distracted by the refinancing activity” when interest rates go down, he said, but once that dies down, the mortgage industry goes back to its links with the real estate and home construction industries to find business.

LMCU even has a commercial lending group to serve the home construction industry in West Michigan. Eastbrook Homes, for example, has an LMCU office in its showroom, according to Burgoon.

Car loans have been hot for Michigan credit unions this year, too. “We are number one in western Michigan in the autos financed, other than leases,” said Jelinski. LMCU has been very active in automobile loans, with direct links to dealers, “for a good 20 years,” she added.

However, there are many more leased automobiles than there used to be, she said, a strategy of the auto industry because the outright purchase price of many new cars is beyond the range of many consumers. 

Jelinski said the auto industry will do well “as long as they make cars very affordable by cutting their cost and passing some of that on to consumers.”

“What’s suffering this year is the used market, because the new cars are so much more affordable,” she added.

While credit unions have been having a good year and, in general, are getting stronger, they need that strength as banks continue to lobby in Washington for passage of legislation that would put a federal tax on credit unions, just like banks are taxed.

Jelinski noted that, unlike banks, a credit union is not owned by stockholders but by the members. Also unlike banks, credit unions cannot raise capital by selling shares; they must survive on earnings.

“That is why you never see a bank become a credit union. You can only expand, or return money to your users, by earnings,” she said. “Our hands are tied; it’s hard to do what we do.” 

She said there would be no advantage to having a credit union charter if CUs were federally taxed like banks. “This is always the banks saying, ‘They have an unfair advantage.’ The straight answer is, ‘No, we don’t.’”

A credit union “is a whole different business model” compared to a bank, said Jelinski.

With headquarters at 5540 Glenwood Hills Parkway SE in the city of Kentwood, LMCU serves one in six West Michigan residents, according to Jelinski. There are 32 branches in Kent, Ottawa, Kalamazoo, St. Joseph and Grand Traverse counties, and 92 ATMs. With the expanded charter, LMCU plans to open a new branch office in Farmington Hills in December and another in Troy early in 2014.

LMCU has more than $2.9 billion in assets, with $1.7 million in loans and more than $2.3 billion in savings, owned by 271,913 members. It is the second largest credit union in Michigan, after DFCU in the Detroit region.

Michigan credit unions did very well this year. According to a report from the Michigan Credit Union League in September, credit union membership in Michigan increased for the eighth straight quarter; 1,000 more CU employees were hired during the past four years. The National Credit Union Administration also reported that Michigan credit union loans for new and used cars far surpassed the national averages in the second quarter of 2013.

Jelinski said her staff has determined that LMCU is currently the largest financial institution based in West Michigan, replacing Independent Bank.

However, Mercantile Bank Corp. of Grand Rapids announced in August it is merging with Firstbank Corp. in Alma, which they say will create one of the largest banking institutions headquartered in Michigan. The combined company will reportedly have total assets of $2.8 billion, deposits of $2.3 billion and loans of $2 billion, making it the third largest bank headquartered in Michigan by market capitalization and deposit market share.

Jelinski said she is not sure how the Mercantile merger will shake out.

“Whenever that’s done, maybe we won’t be (the largest),” she said with a laugh.

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