Relentlessly Pursuing 2 to 10 in 10 by: Joe Brancucci - President and CEO -- Prime Alliance Inc.

While attending last month's CU Housing RoundTable meeting graciously hosted by Navy FCU, I mused about credit unions, real estate lending and, the topic of the day: growing credit union market share from our exiting 2% market share to 10% market share in the next 10 years, or “2 to 10 in 10”. You’ll recall that the initial CU Housing RoundTable was held last May. The outcome of the day-and-a-half discussion was four Big, Hairy Audacious Goals, “BHAGs” for short. The biggest BHAG of all is increasing credit union market share.

What got me thinking was a question about mortgage brokers. Mortgage brokers, command between 30% to 40% market share every year. That’s not news. This is: brokers are old-school. Many originate with a paper application (the 1003), a pencil and a calculator. They’re not in control of the process like credit unions are. And they’re expensive.

That's right, expensive. I'll bet you a quarter (limited to the first 400 people to respond) that your credit union's closing costs are lower than the brokers in your area. And not by a little bit. I know, from years of comparisons, that credit unions are the low closing cost provider. So confident am I that I'll put a Ben Franklin - - twenty-five cents at a time - - on the line to anyone who can prove me wrong.

Remember, we're talking fees, not rates. National studies show credit union mortgage rates aren't all that different from our competition. Why? Because most mortgage lenders set their rates using the secondary market as a guidepost. Don't get me wrong, many credit unions also offer lower rates in addition to the lowest available closing costs. But I am focused on closing cots for one simple reason: the amount of money members bring to the closing table for a broker loan can be significantly higher. It's an affordability issue, plain and simple.

My point is this: Members use brokers because brokers are relentless. Once introduced to a borrower, the typical broker is loath to lose a deal. Keeping the borrower close, through constant communication, is their forte. They'll do everything possible to get a loan closed, including matching borrowers with products that aren't good for them in either the short- or longer term. If an option ARM gets the deal done, then an option ARM it is. Why? Brokers only get paid when loans close. Just ask your members, the ones who are desperately trying to refinance their way out of option ARMs and other exotic mortgage products, how they found their way into these undesirable programs. The most common answer: a mortgage broker.

If brokers are relentless, then credit unions are earnest – and honest. We want what's best for members, which is financing their home at their credit union. Yet we’re not good at the basics: we don’t do a good job of staying in touch, of keeping members informed. That’s how the brokerage community beats credit unions, it’s that simple. If we want to grow market share, if we want to help more members become homeowners more affordably, we need to become relentless communicators. Communicate often, communicate the credit union difference, communicate the credit union value proposition, show members in exact terms how significant the credit union financial difference is.

Earnest and relentless are both good. Credit unions have the money, process and quality advantage, along with the product and relationship advantages. From where I sit that's a five to one advantage. Now let's add relentless to our list. The result: we'll save members thousands of dollars. We'll also solidify relationships with members, and grow our share of the market to the 10% we're after within the next ten years.

So what are we waiting for? Good question. Seems to me we’ve been looking for THE answer, the Holy Grail that will make our members flock to us for all their home financing and real estate needs. THE answer is that THE answer is actually a number of answers. When competing with the broker community, THE answer is consistent member communication. Consistent communication with real estate agents is helpful as well. Interested in other components of THE answer? Watch www.creditunions.com for more ideas.

It is NOT to Late to Register!

This year we are focusing on the power of partnerships and how those partnerships will help more of your members realize the dream of home ownership through your credit union.

It is through partnerships and our joint efforts that we all can realize the dream of putting more members in homes. The question is do you Dare to Dream? If so, partner with us for the 2007 Prime Alliance Symposium and learn how powerful partnerships can make dreams come true for you and your members.

To Learn More Click here

-Powerful and Innovative Guest Speakers-
- Dr. Robert Kriegel -
- Mr. Eric Whal -

-Five Different Educational and Informative Breakout Sessions-

-Great Opportunities for Networking & Visiting Old Friends-
- Dinner Cabaret -
- Opening Reception -

-2007 Prime Alliance Golf Outing

and Much MUCH MORE..

In 2006, Matthew and Regina were engaged to be married and wanted to start their new life together by purchasing their first home. Matthew, 27, and Regina, 24, had been members of Wright-Patt Credit Union, Inc. since 2003 and decided to participate in a homebuyer’s seminar offered by the credit union. They were introduced to loan originator Angela Yarbrough.

The couple was employed and had a combined annual income of more than $62K, but Matthew’s full time job in sales was commission only – making it difficult to verify his income. Regina was a full-time student working two part-time jobs – one of which was a seasonal position. Together they had little savings, a history of late pays in 2006, and high debt ratios due to her student loans.

After an unsuccessful attempt to approve them using a different loan product, Angela was able to get Matthew and Regina a “yes” through Fannie Mae’s MyCommunityMortgage product and they were able to move into their new home two weeks before their wedding.

Working with Angela Yarbrough and Wright-Patt Credit Union, Inc., the couple was able to accomplish two major milestones: they achieved the American Dream of homeownership before age 30, and celebrated their first Valentines Day as newlyweds in their new home.

This is just one example of how MyCommunityMortgage can help get more members into homes and save them money. To learn more about the many features available, contact Tammy Trefny, your Fannie Mae Prime Alliance representative, or visit the MyCommunityMortgage page at www.eFannieMae.com.

MyCommunityMortgage™, Fannie Mae’s affordable lending product, is making the dream of homeownership a reality for more families. MCM™ has a number of flexibilities and features that make it an attractive option for many of your members and a way to further your credit union’s affordable mortgage lending offerings.

Today, many young adults are interested in purchasing a starter home instead of renting an apartment when they graduate from college and start their first job. However, like
many recent graduates, they often have accumulated high student loan debt, have little or no savings, and may also have a short or impaired credit history. These circumstances can make it difficult to obtain a mortgage using traditional financing
options.

With MyCommunityMortgage’s features -- 100% financing, low or no down payments and the lowest mortgage insurance requirements -- Prime Alliance member Wright-Patt
Credit Union, Inc. is able to help open the door to homeownership to even more members, including younger members like Matthew and Regina.

Specifically, Home Possible makes it easier for such members to come to the closing table by narrowing downpayments to as little as zero and eliminating the need for pre-purchase counseling or to bring cash to a single-family closing. Home Possible, which can be used to finance one-to-four unit properties, also offers generous debt-to-income ratios (43 percent), and a wide range of terms, including a 40-year fixed-rate for members who want low monthly payments with maximum stability. Members can also choose 15 to 30-year fixed-rate terms as well as 5/1, 7/1, and 10/1 CMT & LIBOR-indexed ARMs.

We also changed our rules last year to make our nation’s 1.5 million members of the Armed Forces eligible for special Home Possible features originally restricted to critical community workers, like police and firefighters. (And who is more critical in these times than our military personnel?) These special features include higher debt-to-income ratios and temporary subsidy buydowns that can increase a member’s home buying power by as much as 30 percent.

All of which gives credit unions a new way to reach out to more hard-working and deserving families who want the opportunity to succeed as the owners of an American home.

Tip #2: Hold down origination costs. Freddie Mac is actively engaged in discussions with credit unions about new ways to reduce their costs of doing business. For example: last year we responded by eliminating the assessment fee on conforming conventional loans that receive a “caution” on their first submission through Loan Prospector®.

Loan Prospector, Freddie Mac’s Internet-based automated underwriting service, is available to credit unions through Prime Alliance. Overall, Loan Prospector is designed to reduce a credit union’s per-loan underwriting costs and provide instant access to the full-range of Freddie Mac mortgage products.

Tip #3: Protect your base. Credit unions and most financial institutions view a mortgage as a first and major step to capturing a new member – a member they can later cross-sell an average of five additional financial services. It is increasingly clear that the key to sustaining these cross-selling opportunities is the presence of an aggressive and flexible foreclosure avoidance program like Freddie Mac’s. Our primary goal is to keep as many homeowners as possible in their homes through forbearance, loan modifications or other workouts by working with our servicers and a national network of non-profit organizations. Together, we keep an estimated 50,000 delinquent homeowners in their homes and in the market as potential customers of additional financial services.

The bottom line:

Freddie Mac products like Home Possible, and services, like Loan Prospector, not only enable us to fulfill our Congressionally chartered mission to expand homeownership opportunities and assure market liquidity, they provide credit unions with some of the essential tools for building their mortgage operations into a vital engine of future growth.

Rather than predict when the mortgage market will glide off the bottom of the current real estate cycle for more dynamic altitudes, I’d like to tell you what some credit unions are doing to build market share now -- in anticipation of the next upswing.

Tip #1: First, they’re making affordability as flexible as possible so more credit union members can thread the needle between sluggish wage growth and home prices that rose more than five percent last year and remain historically high (despite some well publicized cooling off in the over-heated coastal markets).

One way they’re doing this is by taking advantage of Freddie Mac’s Home Possible? suite of mortgage products for members with limited credit and/or downpayment savings. As more credit unions looked for responsible ways to qualify such members to maintain their production volumes, Home Possible activity took off. In fact, Home Possible originations rose more than 500 percent over the past nine months.

That’s because Home Possible is one of the few opportunities credit unions have to offer a conforming, conventional loan that can

1) overcome many of their members’ financial obstacles to homeownership so they can better level the playing field with larger lenders and

2) compete on their reputations for providing close personalized service.

Real Estate Services -- Why NOT?

Through Prime Alliance Real Estate Services your members can realize the possibility of home ownership. Using our expertise to move one family at a time, our dedicated team matches our services and our selected real estate agents with your members' specific needs.

Look at the exclusive Member Benefits Prime Alliance Real Estate Services can offer your members:

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