SOUTHFIELD, Mich. – David Toepp is tired of hearing credit unions use the excuse that there's no demand for mortgages from their members to explain why they don't offer mortgage services. After all, if members are homeowners, then they must be getting their mortgages from somewhere else. Toepp says those mortgage dollars should be going to CUs, and he wants to do something about that. Toepp, 49, has been president/CEO of Mortgage Center LC since 1995. A mortgage CUSO organized in 1990 by six Michigan CUs, Mortgage Center is still owned by the same CUs – State Employees CU, Lansing; BestSource CU, Waterford; Motor City Co-Op CU, Clinton Township; Municipal and Health Services CU, Pontiac – plus Christian Financial CU, Roseville, which was formed through the 1997 merger of two founding CUs – Serf CU and Northeast Catholic CU. Fifteen years later, Mortgage Center serves the above five CUs plus over 50 affiliate credit unions all located in Michigan. Toepp says the CUSO has never considered expanding its services to CUs out of the state. We don't have 100% penetration in the state yet, he says, so we still have work to do here. "Consumers still don't equate credit unions with mortgages. We have a lot of work to do to correct that, and more than 30 years to overcome as far as changing consumer's perception of credit unions' image," says Toepp whose background is in mortgage banking. He attributes consumers' misperception about credit unions' mortgage lending involvement to the narrow variety, niche mortgage products CUs have tended to offer. "Credit unions are slowly moving in the right direction and are starting to offer a greater variety of product, but there's still a lot of work that needs to be done on the awareness front. It requires a constant marketing program to keep consumers aware that credit unions not only offer mortgage services but a variety of product types," says Toepp. "What credit unions have done essentially is trained their members not to look to them for their first time mortgage," he says. "Sometimes it needs to be pointed out to the credit union board why there's no demand from their members for mortgage. "Credit union fortunately are more receptive to new mortgage products, there's not as much resistance now as there once was," he adds. Now that we've moved in to a purchase market from a refinance market, there will be demand for more creative products. So it will be incumbent on credit unions to have these types of products for their members when they inquire about them." Mortgage Center offers a wide menu of mortgage products such as a 100% financing fixed or variable rate product and a combination loan that eliminates private mortgage insurance. It recently introduced a 10-year balloon hybrid loan with a 30-year amortization. The CUSO says the product is designed to allow first-time homebuyers the ability to use the zero down payment option coupled with a lower rate balloon mortgage that typically required a more sizeable down payment. Of all the CUSO's products, Toepp says its 30-year fixed-rate mortgage is the most popular. He described the Michigan market as being "a conservative environment where people tend not to move often and don't buy more house than they can afford." Still, the typical length of time homeowners remain in their homes "is all over the board," he says. Younger, first time homebuyers who are making up an increasingly larger segment of the Michigan homebuying market, typically sell their home after around seven years. Older homeowners, in comparison, have been in their homes much longer, sometimes as long as 40 years. But it's the emerging purchase market that Toepp said credit unions should be targeting now, and whereas the refi market was across the board with both young and older members, he said the purchase market is mostly comprised of younger, first time homebuyers. "Those are the consumers credit unions should be focusing their mortgage products on now, because if they can get these homebuyers when they're young, they'll become these homeowners' primary financial institution," says Toepp. The Mortgage Center president is happy that "in some small way, we've been helpful in credit unions overcoming their trepidation about mortgage lending. We've given them a methodology to do mortgage lending that isn't painful to them. As a CUSO we can employ the means necessary to help credit unions navigate through mortgage issues painlessly." Mortgage Center gives each credit union it closes mortgages for the first right of decision whether to keep the mortgage in their portfolio. It's up to the discretion of each credit union whether they want to hold on to the mortgage or sell it on the secondary market to Fannie Mae, says Toepp. Regardless if a mortgage is sold on the secondary market or retained in a CU's portfolio, Mortgage Center services all mortgages. Servicing typically accounts for about 35% of the CUSO's revenue. Last year it serviced over 7,500 mortgages worth $740 million. That figure has steadily climbed – at the end of 2003, it was $723 million; 2002, $662 million; 2001, $486 million; and in 2000, just $350 million. In 2004, Mortgage Center closed $185 million in loans. It projects it will close $200 million in mortgages in 2005. Mortgage Center has 37 employees including 18 in loan origination, 12 in servicing/accounting, and the remaining seven are in management positions. Toepp said Mortgage Center has put a lot of effort in to developing its online mortgage application process. "We've found most members don't want to leave the comfort of their home or office if they don't have to, we've moved beyond the notion that the member has to come in to complete their mortgage application. So we've developed the technology to help members apply for their mortgage online. Members like having the option of choosing whether to apply for a mortgage face-to-face or online. Whether a credit union works through us or not, members like knowing they have that option. That's the wave of the future." -

[email protected]