GOLDEN, Colo.—A number of smaller credit unions are dramatically ramping up their mortgage lending—some doubling their portfolios in less than two years—by leaning on a third-party provider for mortgage services they could not affordably provide on their own.
One credit union in South Carolina increased its mortgage outstandings by 237% in three years. Northwest Community CU in Oregon boosted its portfolio by 60% in three years. While Greater Texas CU saw its mortgage loan originations jump 342% year over year in Q1 2018.
The credit unions have been working with TruHome Solutions, a mortgage lending CUSO based in Lenexa, Kans. The CUSO, owned by four credit unions, is helping small to mid-sized CUs that have stayed out of the mortgage market or participated only to a small extent because they lack the scale to make offering mortgage products affordable.
Lending On Tap
On Tap CU in Golden, Colo., for instance, has been using TruHome for just under eight years and says its mortgage portfolio would be much smaller today without the assistance.
“Our portfolio is just over $60 million today,” said Bryan Thomas, VP of lending at On Tap. “Had we not gone this route I’d say that we’d have maybe half that amount right now, and less assets too.”
The $255-million credit union said one of the biggest advantages with using a mortgage CUSO is that it’s not that difficult to keep the volume steady and strong, thereby serving more members.
“We consistently average between 20-24 units a month, which is good for us from where we used to be. And we average between $40-$50 million per year in first mortgage production.”
Eight years ago the credit union’s assets were well below $200 million and Thomas said offering mortgages was not very cost effective for the credit union to do on its own.
“What helped us a great deal is that we are able to pick and choose from TruHome the services they provide for us,” said Thomas.
What’s Being Offered
TruHome offers origination (loan officer), processing, underwriting, loan servicing and secondary market support.
On Tap is using the CUSO for origination, processing, underwriting, servicing and secondary market sales, Thomas said.
“With the way mortgage business can fluctuate—for example the drop-off in refinance business in recent years—we did not want to have to continually hire, and then let staff go,” said Thomas.
The credit union has two loan originators at its two branches who handle originations along with TruHome, which handles applications over the phone.
“In managing and entire mortgage department there can be a lot of operational inefficiencies—there can be a lot of cost to a smaller credit union,” said Thomas. “There is so much compliance to deal with, and that requires overhead, time and effort. There can be significant fines if you don’t follow the letter of the law, and there are just so many details. Even a few mistakes can be costly. Having a partner to work with takes the pressure off the credit union.”
Setting a Profit Target
TruHome, which has about 100 clients nationwide, charges a credit union a basis point fee based on their level of service, explained President Doug Hoelscher, who did not disclose pricing.
“We work with our credit unions to set a profit target for their mortgage program,” Hoelscher said. “We demonstrate to them that we can put them into the mortgage market and make it profitable for them. They can enter the market with competitive rates, hit their established profit targets and still be able to pay the TruHome fee.”
Jeff Vossen, SVP of originations and operations for TruHome, said the fee paid to the CUSO is no different than facing the costs in-house, which would likely come in higher due to the credit union lacking scale.
“This is a one-time charge when the loan closes,” Vossen said.