TheMReport — News and strategies for the evolving mortgage marketplace.
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TH E M R EP O RT | 13 COVER STORY By Xhevrije West I n the heavily-regulated mortgage industry we currently live in, it can be difficult to stay ahead of the competition and maintain compliance. Although it may seem like large lenders are the only ones that are on top of their game, there is another group of institutions that are making their mark in the industry. Credit unions have long been known to be silent movers in the mortgage industry—but that ends now. These member-owned, nonprofit cooperatives may seem mysterious in nature, but that is only because they have gone unexplored for so long, leaving industry professionals, as well as consumers, to create their own theories about them. In reality, credit unions are dealing with the same issues as larger lenders such as new regula - tions, compliance matters, and competition. And the ways they are managing these issues could provide a path forward for other institutions, no matter their size. The Misconception T he misconception surround- ing credit unions in the mort- gage industry has long been that they are small in comparison to other traditional mortgage lenders. They are often overlooked and thought to serve some function other than their sole purpose—to serve their members. "The biggest misconception about credit unions is we're the corner mom-and-pop, where you got your first savings account, your first checking account, but that's all we offer. People think we're small and don't offer the same types of products as the big guys," said Katie Miller, VP of Mortgage Lending at the nation's largest credit union—Navy Federal. Part of Miller's team is Kevin Parker, AVP of Field Mortgage Operations within the Real Estate Liaison Team, and Loan Officer Paul Garcia—who say that con- sumers are often unaware of the services that Navy Federal provides. "I always had a perception of credit unions as being super conservative, or they weren't really focused on sales," Parker noted. "We tend to find that members and Realtors just are not quite sure that credit unions offer mortgage products. Most people believe we only serve military members, but we also serve their families." Jerry Harmon, Chief Lending Officer at States Employees Credit Union—the second largest credit union in the U.S., with $28.65 bil- lion in assets—thinks that people often confuse credit unions with other financial institutions. "Even though from the surface we may look like other financial institutions, there is a vast difference in philosophy and purpose," Harmon explained. "Credit unions themselves vary from each other even though we are all member-owned. It is difficult for some people to understand the member-owned cooperative concept and always see the benefits of being a member and developing the trust that their credit union is always going to have the member's best interest in mind." Another theory about credit unions is that they are a bit out of date in the mortgage lending world. Vince Nowicki, VP of Real Estate Originations at Mission Federal Credit Union sets that record straight noting that "we're out there buying the same technology and using the same technology that some of the bigger organizations are using. So we're able to have good Web presence. You're able to apply for mortgage loans over the Internet and you're able to make your mortgage payments over the Internet. You can do all of the things at a credit union that you can do at Bank of America or Chase or anything like that. We're not old school anymore. We're all kind of doing the same thing." The Big "T" Word A lthough assets and member- ship numbers may separate credit unions, there is one topic where the consensus was all the same—the Consumer Financial Protection Bureau's (CFPB) TILA- RESPA Integrated Disclosure (TRID) rule. No matter how much planning and preparation has been done, credit unions are still battling with the new regulation. Director of Regulatory Affairs for the National Association of Federal Credit Unions Alicia Nealon said, "The CFPB mort- gage-related regulations, taken individually and more so in their cumulative effect, have significantly altered the lending market in unintended ways. In particular, the ability-to-repay, qualified mortgage, mortgage servicing, TRID and, most recently HMDA rules have required credit unions of various sizes and complexities to make major investments, and incur significant expenses. Taken all to- gether, these regulations have made credit unions rework nearly every aspect of their mortgage origina- tion and servicing operations." Northwest Federal Credit Union President and CEO Chris McDonald said that navigating the regulatory landscape is the biggest challenge facing credit unions today. "In order to succeed going forward, credit unions will need to invest more money and time towards resources such as training, system integrations, and staffing," he said. TRID, which went into ef- fect October 3, 2015, shook the mortgage industry, altering the way lenders originate loans. The rules, which are meant to give homebuyers more information with which to vet lenders and compare the cost of mortgages more effectively, require lenders to "Even though from the surface we may look like other financial institutions, there is a vast difference in philosophy and purpose." —Jerry Harmon, Chief Lending Officer, State Employees Credit Union