MORTGAGE LENDING: BY JIM DEITCH
Credit unions are slowly but surely upping their piece of the market share
pie, but they still have a way to go to catch up with banks. These five tips
can help your CU close the gap on the competition.
Background
• According to MBA, bank market share fell from 71 percent in 2008 to 55 percent in 2014. Credit union share has increased from four percent to five percent, leaving much room to take share. Independent mortgage bankers’ share increased from 25 percent to 40 percent, but independent mortgage bankers cannot compete with many credit union products.
• The business of mortgage banking has fundamentally changed, as banks shy away from any loan they perceive as risky. Credit unions have a fundamental advantage in that they can weigh a member’s overall situation carefully and assist members who are good credit risks. For example, banks routinely turn down borrowers with the following characteristics:
– Buyer has home to sell, back-end ratio too high, even with ‘guaranteed sale’
– Self-employed, business LOC due within one year, back-end ratio too high
– Self-employed, tax returns complex and needs ‘global ash flow’ underwriting
– Non-warrantable condo
– Jumbo fixed rate and hybrid ARM needs with LTV > 70 percent
– Construction-to-perm or rehab loans
– Income variable due to bonuses, trend is ‘down,’ two-year average results in high DTI
– Trailing spouse income not verifiable
– Recently graduated doctor, attorney, etc., income mobility disqualifies due to DTI
Credit unions can take the time to evaluate members with these characteristics and often make the loan.
