It's so easy to forget that credit unions are dealing with the same regulatory and compliance issues that traditional lenders are facing. Vince Nowicki, VP of Real Estate Originations at Mission Federal Credit Union shares some insight on the largest issues that credit unions face on a day-to-day and how they are overcoming them.
MReport: What do you think is the biggest issue or misconception surrounding credit unions in terms of mortgage lending.
Nowicki: I think probably from a mortgage lending standpoint, one of the bigger misconceptions about credit unions is that were more conservative than the general market and that were old school. And we’re not really old school anymore. We’re out there buying the same technology and using the same technology that some of the bigger organizations are using. Then we’re able to have good web presence, you’re able to apply for mortgage loans over the internet, 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 BofA or Chase or anything like that.
We’re also not as conservative as folks thinks. Truth be told, we’re actually able to apply a little bit more common sense with our portfolio lending and actually do a better job than some of these larger lenders. That’s how credit unions roll. We’re all in our communities. And even some of the ones that are based on a certain employee—like a fireman’s credit union or DT and E’s credit union—they’re specifically working with only a certain subset of the population and we can cater to those folks a little bit better. I think there are some misconceptions that we’re old school, low tech,and more conservative and I think we’re working really hard to overcome that.
MReport: What is the largest piece of regulation that credit unions are currently dealing with and how are you working to ensure compliance and avoid penalties?
Nowicki: It’s gotta be the new TRID regulations. It’s tough on everybody. The smaller organization you are, the more difficult it is to simply hire compliance people. If you’re a Bank of America, it’s easy to say “We’re going to bring in a half-dozen compliance people to attack this issue.” If you’re a small credit union in San Diego, you’re kind of on your own.
It’s difficult because it’s completely changed the way that we do business day-to-day as a mortgage lender. We have to work with these closing disclosures where we’re putting Cs together and balancing things that were once handled exclusively by escrow. You just wake up on October 3rd and you don’t have the personnel you need to do the job—you don’t have any escrow people on your floor. The HUD goes away and you’re using different documents and you’re putting together closing disclosures that need to be sent out three days ahead of your actual closing date, so the timing of the loan kind of stretches out a little bit. And you can’t ask your low-level employees to do this job. It’s actually your senior people who are learning how to do this job and putting these closing disclosures together. So the folks who used to churn out the most loan documents for you with the most accuracy are now the ones who are balancing your closing disclosures for you. It’s not optimal. It’s not the most efficient way to do business, so it kind of slows you down a little bit and it’s a little frustrating. But we’re under the gun. We absolutely must comply with these regulations, it just it makes life a little bit more challenging from the origination side of the loan process.
MReport: How do credit unions maintain a competitive edge against larger lenders?
Nowicki: Well we do it through our community base. So we attack the community aspect, but we’re also able to make changes more quickly if necessary. We can respond to market forces a little bit more quickly because we’re smaller and more centralized. To make wholesale changes at a Bank of America or Wells Fargo, you can imagine there’s a bureaucracy, politics, and red tape. Credit unions are smaller, but we’re more agile and a bit more versatile.
We can get in front of a committee or get in front of the Board of Directors and make some changes—whether it be product, our interest rate, or our fee structure—to get more competitive and reshape our product or our pricing to a changing market more quickly. It really gives us a little bit of a competitive edge. We’re the leaders in the innovative product type of world for the mortgage industry. I think it’s just about us being agile, a little bit quicker, and being able to make those changes and keep in step with the changing market. I think that’s our competitive edge.
MReport: The Home Mortgage Disclosure Act (HMDA) data reporting has the mortgage industry shook with the newly added data point requirements. How is your credit union faring with this?
Nowicki: Fortunately, we have a great mortgage origination system that does a real nice job of capturing and aggregating all the HMDA data for us. We also subscribe to a vendor by the name of Quest Soft that takes all of that data and helps us put it together at the end of the year and send our reports to the government on an annual basis. Helps us scrub the data to make sure everything looks the way it’s supposed to and no data is missing. So we can clean those things up and have a nice clean report on an annual basis.
MReport: How are credit unions working to reach the millennial generation?
Nowicki: We’re trying—like everybody else—to understand what millennials want from a mortgage lender. You can hardly pick up a magazine or article right now without somebody bringing up how do we sell cars to the millennial generation or how do we sell wine to the millennial generation. With mortgages, I’m finding its really having a good web presence, a good online presence, being very transparent with your fees and interest rates, and advising on what type of pitfalls you can fall into. They have to have that transparency, they have to be able to open up an account online, they have to be able to make their payments on the internet, and try to do as much of their research as possible—down to even applying for a loan—from the comfort of their home.
But at the same time, if you pick up a phone, somebody’s there to answer the phone, it’s a local person and understands what your wants and needs are and helps you figure out what you’re going to need to get your loan closed.
I really do think the main thing is convenience, ease of use, a good robust web presence so a millennial can get a lot of the job done on the internet, and good transparency so there are no real surprises. This generation does not want to feel like they’ve been bait-and-switched. This is an educated consumer. These are educated consumers. They know what they want and they know the difference between a good deal and a bad deal. Transparency is going to be key. As long as we can give them a good product, help them out, and mold the millennial generation’s wants and needs we should be able to serve them better.
It’s a tough mortgage market—salaries are on the low side, home prices are on the high side, so down payments are going to be difficult to come by. So it is extremely important for credit unions to be able to expand on that and let millennial consumers know that they can have gift down payment. This generation will need that extra support because they are going to have a more difficult time qualifying for a loan on their own.
Editors Note: If you want to read more about what today’s top credit union executives have to say about their businesses, be sure to catch the February 2016 print edition of MReport, where hot topics affecting credit unions will be explored in-depth.