Picture This
By Joe Brancucci, Chairman & CEO Prime Alliance Solutions, Inc.

Like you I see a great number of presentations: charts, graphs, bullet points, blah, blah, blah. And probably like you I find most of it dull, uninteresting, irrelevant. Yet one I viewed this week caught my attention. Expertly presented, artfully delivered, it capsulized all that's transpired in the capital markets over the past two years on a single page, in one painfully simply, yet poignant graph.

The graph I refer to is titled 'The Single Family Mortgage Related Securities Market'. It covers just 24 months and displays just four lines: market share positions of Fannie Mae, Freddie Mac, Ginnie Mae and Private Label mortgage backed securities. Beginning in June 2006, before the sub-prime cataclysm began, it shows what we all knew, and what was adversely impacting credit union share of the mortgage market: issuers of private label securities (Wall Street) held a better than 50% share. The mortgage loans backing these securities were largely what we know as Alternative A and Sub-Prime Loans. At that same point in time Fannie and Freddie held a share in the mid-20% range; Ginnie Mae, buyer of FHA loans, held a single digit share of the market, just as it had for some years.

Fast forward to June 2007. June 2006 was, if not the peak of housing market euphoria, it was pretty close. A year later marked the beginning of a new era, one that will in hindsight be remembered as a return to rationality in the housing and mortgage markets. Take another look at the graph. Private label security issuance began a precipitous decline. No more liar, NINJA or NINA loans. Another year later, in June 2008, private label share registered less than 1%. How things change.

We all know what happened and we all know why. Knowing about it and doing something about it are completely different in terms of importance. Obviously what we do with this information is crucial. Our strategic actions throughout this year and for the next few months will determine the role credit unions play in the housing finance market for the coming decade. Now, paraphrasing the old cliche, 'a picture is worth a thousand words', this graph hints at numerous strategies. One that is obvious for credit unions is clearly depicted by Ginnie Mae's rapidly ascendant share. From single digits just a year ago to greater than 20% today, FHA lending is critical to the future success of credit union mortgage lending.

FHA loans, for us old-timers, were the backbone of many, early first-time homebuyer strategies. Low-cost, low down payment, insured, they made it easy for people, especially those with lower to moderate incomes, to purchase their first homes. Sure they were, and are, more complex to originate and they had a relatively low maximum loan amount, yet they were effective in so many ways. One attractive feature for borrowers and lenders alike was that they were and are sustainable. Where the creative financing vehicles of sub-prime hysteria days routinely put borrowers in payment-shock peril, FHA loans do no such thing.

There's another reason FHA Lending is even more attractive than it was even 30 days ago: the Housing Bill signed into law last month perpetuates the higher loan limits established for FHA loans in legislation that was passed earlier this year. Congress, recognizing that housing prices, while declining in many markets, are higher now than they were when the formula that set FHA limits was originally established. For FHA financing to be attractive, loan amounts had to increase.

What's a credit union to do? Offer FHA loans to your members as soon as you can, either directly or through a credit union and member friendly third party. Industry predictions call for FHA loans to become more than 30% of single family loan originations. Need further persuasion? Some originators who made nice livings making loans that were placed into private label securities (read: the subprime guys) are looking at FHA loans as their next lunch ticket. The more this happens, the more members will overpay. The more credit unions get involved, the more affordable housing remains. Don't procrastinate. This is one of the opportunities credit unions cannot afford to let pass by. Members can’t afford for us to let that happen, either.

This graph does hint at many potential strategies for credit union housing finance. Interested in what else I'm thinking about? Visit the 18 Strategies Blog for more strategic insights into capital market dynamics as well as 17 other strategies (one of the 18 is FHA Lending) I think are essential to credit union mortgage lending growth.

GSE Jitters
By Joe Brancucci, Chairman & CEO Prime Alliance Solutions, Inc.

Prime Alliance Solutions, Inc. and the GSEs (Fannie Mae and Freddie Mac) are separate, independent businesses, the fortunes of which are also separate and distinct. PA and the GSEs work together to ensure credit unions have the solutions they need to help members finance their homes affordably and sustainably. Prime Alliance Solutions believes strongly in the mission of Fannie Mae and Freddie Mac and fervently believes their continued existence is essential to supporting U.S. Housing Policy and credit union mortgage lending (see Joe Brancucci's article, included with this post).

What affect would the much discussed Government Bailout have on Prime Alliance and credit unions? For both of us, it's business as usual. Prime Alliance supports the choice credit unions have to work with business partners of their choosing, including investors. Our technology is some of the most flexible available; we're confident we can support credit union mortgage lending models, regardless of the choices you make.

While no one knows, nor can they accurately predict how a Bailout would change the operations of the GSEs, we do feel confident in saying both will continue to provide their respective underwriting engines and buy loans.

Credit unions are having their best mortgage lending year in their history, a testament to our position as trusted, reliable lenders. Let's keep working together to ensure this opportunity we've been presented ensures we're our members lender of choice for decades to come.

SMSU CEO Webinar Series
By Joe Brancucci, Chairman & CEO Prime Alliance Solutions, Inc.

Prime Alliance Solutions, Inc., strives to bring our customers the very latest in mortgage lending information. Keeping abreast of this rapidly evolving market is something we take seriously, and we want to help keep you informed too. That’s why SMS University is introducing its ‘CEO Webinar Series’ this autumn. We’ll hold these free Webinars once a quarter on topics we know you’ll find useful when making important lending decisions for your credit union.

The Series opens on Wednesday, September 10, with Doug Duncan, Ph.D., Chief Economist with Fannie Mae. Dr. Duncan will be sharing his insight into the future economic outlook for mortgage lending and how it relates to the credit union industry. We know this is very much top of mind.

Duncan comes to Fannie Mae from the Mortgage Bankers Association (MBA), where he served as Senior Vice President and Chief Economist beginning in 2000. In that senior leadership role, Duncan served as a primary spokesperson on economic and mortgage market developments and performance for the MBA, a trade group representing 3,000 companies. These companies constitute the majority of all residential, multifamily and commercial real estate lending in the U.S. Prior to joining the MBA, Duncan worked on Capitol Hill and at the U.S. Department of Agriculture's Economic Research Service.

We look forward to having you join us for this exciting Webinar. Please visit www.consultsms.com for registration information. Future Webinars will feature experts on capital markets and their effect on housing and interest rates, recent legislation and regulatory matters. Look for details soon.

Tough Times Call For First-Rate Member Service
By David J. Miller, Jr., President, Prime Alliance Loan Servicing Powered by Cenlar

Declining property values. Higher gas and food prices. Increased unemployment. Stressed families. Increasing delinquency rates. Don’t let the tough times in our economy sidetrack your mission to deliver first-rate member service. In fact, be sure to spend the time now during these tough times to improve your “member’s experience” Now is the time to cement your relationship and demonstrate real value to your members. How you ask? Simply put, keep in mind that without members there would be no credit union and without the credit union there would be no need for you in the job you hold. Ok, a little harsh I agree but you get my point and now that I have your attention let’s discuss how to deliver first-rate service that leave your members all smiles.

First off, delivering member experience is much more than serving their financial needs. It is more like serving their financial needs while making them feel special. Building a relationship, educating your members, and their children on their financial needs, and treating each and every member with personal service and compassion will bring instant gratification to them and you. After all, we all know that members are more impressed with people than computers. So, show off your people skills! …and be passionate about it! Engage the members in discussion about their financial needs and leave a minute or two of the conversation for whatever it is they wish to share with you be it their family events, personal triumphs, etc. By leveraging the power of communication and attention to build member relationships, you will find that you have established a ‘member for life” mentality (culture) within your organization. The lasting effects of this benefit will have your credit union survive these tough times and have your members entrusting their relationship to you.

It is the confidence in your performance, accountability, and service that have your members fiercely loyal to you. They know that you are there for them in bad times, as well as good. This positive impression of knowing you will be there no matter what will have your members all smiles.

Call us today at 609-883-3900 ext. 5404 to find how easily your members can be all smiles. After all, it’s possible with Prime Alliance Loan Servicing Powered by Cenlar at your side.