THE BRAIN DRAIN BATTLING the CLOCK by Tom Burton N Page 38

JANUARY • 2016 ACUMA Celebrating 20 Years

PIPELINEMAGAZINE

THE BRAIN DRAIN BATTLING THE CLOCK By Tom Burton n Page 38

R G E N T I I T R I E U M R

T R

Moody’s Mark Zandi Assesses the Economy n Page 30 INSIDE: New Features: Names in the News n Pages 5, 8 A Star is Born

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ACUMA 2 Columns 2 President’s Column: PIPELINEMAGAZINE Topics of Interest to ACUMA Members and Mortgage Lenders By Bob Dorsa ACUMA Pipeline is a publication of the American Credit Union Mortgage As- sociation, PO Box 400955, Las Vegas, 4 A Message from the Board: NV 89140. Comments about ACUMA’s Strategic Direction By Mark Wilburn, Board Chairman Mark Wilburn 5 Industry Successes: Truity Credit Union Noteworthy benchmarks of member organizations Chairman 6 Compliance Challenges: Pam Davis A Look at Pressing Issues Affecting Credit Unions Delta Community CU By Kris Kully Vice Chairman 8 Making a Difference: Barry Stricklin Honors, Awards and Recognitions for Individuals Tower FCU and Organizations Treasurer 10 Regulation and Legislation: Tim Mislansky An In-Depth Look at Issues Affecting Credit Unions at the Wright-Patt Credit Union Federal Level Secretary By John J. McKechnie John Reed 56 The Last Word: Maine Savings FCU A Look at Big-Picture Issues Facing Credit Unions Director By Tracy Ashfield Michael Patterson, Financial Partners 12 In the Pipeline: Insights and Observations on CU Mortgage Lending Credit Union Director 12 Managing Risk: An Alternative to Servicing Your Loan Portfolio – By David J. Miller Jr. Bob McKay Anheuser-Busch ECU 14 Are You Prepared for the Spring Home-Purchase Market? Director It’s Not Too Soon to Make Product and Services Decisions to Help Members – By John Castiello, Bob Dorsa 18 Job Market Weakens but Home Prices Rise in President ‘Energy Patch’ States – By Ralph DeFranco, Ph.D 24 The Road to High Performance Credit Union Mortgage Lending Six Key Indicators Can Help Show You the Way The information and opinions pre- sented here should not be construed By Nizar Hashlamon and Dan Green as a recommendation for any course of action regarding financial, legal or accounting matters by ACUMA, The 30 U.S. Macro Outlook 2016: The Economy Is in Gear ACUMA Pipeline or its authors. By Mark Zandi © Copyright 2016 by ACUMA. All rights reserved. Printed in the USA 38 THE BRAIN DRAIN: BATTLING THE CLOCK By Tom Burton 47 The Top 300: Opportunity Comes with Challenges in 2016

January 2016 - PIPELINE 1 A LOOK BACK, A LOOK AHEAD

President’s Column Topics of Interest to ACUMA Members and Mortgage Lenders By Bob Dorsa

It was 20 years ago today Sgt. Pepper taught the band to play. THE GAME HAS CHANGED So the game has changed. More They’ve been going in and out of style credit unions are making home loans. ACUMA feels but they’re guaranteed to raise a smile. More of them are using ACUMA to Lennon/McCartney share ideas, learn from industry leaders strongly that Sgt. Pepper’s Lonely Hearts Club Band and gain knowledge of the industry. we need to join It was just about 20 years ago today So, we know that we’ve “taught the that a handful of credit union folks, at- band to play,” what’s next? together to tending a conference in Washington, ACUMA feels strongly that we need advocate for D.C., gathered to lay the foundation for to join together to advocate for credit a new organization, one dedicated to unions. I’ve talked frequently about the credit unions. mortgage lending. credit union difference and how we From those discussions rose the have no other purpose but to serve our members. There are no stockholders to American Credit Union Mortgage Asso- the policymakers (both regulators and satisfy, no profit to be passed along. That ciation, or as we know it, ACUMA. And legislators) who set the boundaries for difference can resonate with all of our while we don’t go “in and out of style” our business. There’s no better place members. Whether they are first-time like the Beatles’ orchestra, we do make to engage them and make a case for buyers (increasingly our “millennial” some pretty good music together—and credit unions. generation) or looking for another home that’s certainly something to smile about. So, put Sept. 19-21, 2016 on your to satisfy their changing needs, credit The annual ACUMA Conference calendars. Check out our program on unions do a better job in assisting them. will return to Washington, D.C. this the acuma.org website and talk to your We are community-based, so we fall (Sept. 19-21) not so much to recall team about attending. The substance know the local economy; we can be those early days (although we’ll mark for this conference’s content is bigger flexible in the kinds of loans we offer our anniversary with some special than mortgage lending; it touches all of (and they qualify for), and we have events) but to take stock of the chang- your operations, including human re- their best interests in mind. es and growth ACUMA has helped to sources, marketing and finance. Here’s That’s the story we need to tell. We bring about in the real estate-lending your chance to engage your executive must advocate for the credit union dif- world of credit unions. leadership team and show them what ference. From our small beginnings ACUMA ACUMA is about, what it’s become. has grown to become a player in the We encourage you to join with your mortgage lending industry, attracting peers in our nation’s capital to mark a nearly 400 attendees for our annual SHARING ACUMA’S MESSAGE significant anniversary for the bigger Taking the message to members conference in Las Vegas for last fall. picture of CU mortgage lending and to has been important, but we must And interest in mortgage lending learn more about engaging and advo- now go beyond that—taking it “to the continues to grow in credit unions, cating for the credit union difference. where the market share of new-loan streets,” of D.C., that is, to our nation’s policymakers. originations has grown considerably Bob Dorsa has been ACUMA’s presi- A big part of advocating for credit and hovers around 10% of the nation’s dent for all 20 years of its existence. He union mortgage lending comes bun- market share—yes, 10%. In just the first has been instrumental in building the dled up with policy—the rules and reg- half of 2015, credit unions in the United organization into a solid national player ulations. So symbolically, Washington States granted 329,057 first-mortgage for credit union mortgage lending. loans to help members achieve the becomes a natural choice for marking American dream of home ownership. our 20th year. It’s home to so many of

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A Message from the Board Comments about ACUMA’s Strategic Direction By Mark Wilburn, Board Chairman

couple of decades ago when a handful of credit union Our group not only leaders formed an organization for mortgage lenders, provides a forum Athe idea was to network—share ideas for making for the exchange homes loans—to help credit unions build programs to help of ideas, it exposes members become home owners. its members to At last fall’s ACUMA conference Our group not only provides a fo- the movers and it struck me how far the organization rum for the exchange of ideas, it ex- has come. The conversations reflect the poses its members to the movers and shakers within the growth and depth. It’s no longer “How shakers within the industry as well as industry as well as many loans?” or “What’s your volume?” the regulators and policymakers on the Instead the talk moves into sub-servic- federal level. the regulators and ing, the secondary market, portfolios We reach out and establish ties with and risk management. It’s about varied like-minded groups, such as the Nation- policymakers on the product offerings, the CFPB and TRID. al Association of Realtors, who work lo- federal level. Yes, times have changed, and cally to make home ownership a reality ACUMA has evolved into an impor- for more members. tant player in mortgage lending for Our national conference brings doz- credit unions: ens of top speakers to share ideas on ers ranging in size from the very largest the big issues and best practices, and to smaller operations. our workshops zero in on your busi- Together, we are making a differ- ness challenges with ideas you can take ence. As credit union market share for As one recent back to your shop. mortgage loans continues to move into ACUMA has worked with NCUA to double figures, it is becoming increas- workshop attendee create education and training for small ingly important to stay ahead of the put it: ‘I have credit unions on realistic mortgage curve. ACUMA provides you with that strategies. edge, allowing you to compete in the learned that being Indispensable? Well, here’s what marketplace and serve your members one recent workshop attendee, Casey with outstanding value. an active member Filburn of Advantis Credit Union of ACUMA is a tool in Portland, Oregon, put it: “I have Mark Wilburn is the incoming chair- learned that being an active member of man of the ACUMA Board of Directors. to improve ACUMA is a tool to improve my organi- He serves as senior vice president and zation that is just as important as any chief lending officer at Truity Credit my organization other tool I use.” Union in Bartlesville, Oklahoma. Previ- that is just as As incoming chairman, I want cred- ously, Wilburn worked at Affinity Plus it unions to see all of the ways ACUMA Federal Credit Union in St. Paul, Min- important as any is making a difference for mortgage nesota, and Point Loma Federal Credit lending. We’re a growing organization Union in San Diego. He received the other tool I use.’ with members from across the United 2015 Phil Greer Lifetime Achievement States and credit union mortgage lend- Award from the CUNA Lending Council.

4 PIPELINE - January 2016 INDUSTRY SUCCESSES

Industry Successes Noteworthy benchmarks of member organizations

bers of the Dothan, Alabama-based Launched as a partnership of CUM- credit union. In 2014, Five Star bought Anet, New Jersey Community Capital Flint River National Bank of Camilla, (NJCC) and Affinity, the platform has This issue marks the debut of our Georgia, and also converted its custom- gained local and national attention for new “successes” column for member ers to CU members. Aaron W. Craig, Di- its “unique and responsible approach organizations. We will continue to pub- rector of Mortgages & Collections, says to improving the borrowing experience lish news of interest in coming issues of Five Star is becoming known as the for this critical demographic group,” The Pipeline. For information on how to credit union in southeast Alabama that CUMAnet reported. submit news, please check the italicized is buying up banks. CUMAnet also has added NJCC to paragraph at the end of this article. (We l its ownership group, its first expansion also have begun a separate column for CoVantage Credit Union, based in in more than a decade. NJCC joins Af- honors, awards and recognitions.) Antigo, Wisconsin, was awarded a $2 finity, Greater Alliance Federal Credit l million grant from the U.S. Treasury’s Union and Credit Union of New Jer- Credit unions in the Waterloo-Cedar Community Development Financial In- sey in the group, which is celebrating Falls, Iowa area lead the credit union institution Fund to help people of modest its 20th anniversary. dustry in mortgage loan origination mar- means in rural and low-income com- l ket share, capturing 44 percent of the lo- munities buy affordable homes. The Annual awards for excellence in cal market in 2014, according to Callahan grant was used to create a down pay- mortgage lending were announced & Associates’ analysis of Home Mortgage ment assistance program to which the in November 2015 at the 11th annual Disclosure Act. Veridian Credit Union credit union contributed another $13 myCUmortgage Partner Conference. led the market with 24.35 percent mar- million, CoVantage says. The program Credit unions received awards in a ket share, followed by University of Iowa also provides funding to make needed number of categories from myCUmort- Community Credit Union with 14.6 per- repairs to homes that are under distress gage, a CUSO serving nearly 200 credit cent, notes Chris McGovern, Veridian’s or creating unsafe living environments. unions and owned by Dayton, Ohio- mortgage lending manager. The program assists individuals based Wright-Patt Credit Union. l and families that may not have quali- For most loans originated, winners The Mortgage Services Department fied for a mortgage previously, opening are Rogue Credit Union of Medford, at Fairwinds Credit Union has cel- a chance for home ownership to hun- Oregon (large credit unions), Hopewell ebrated a record-breaking year, reports dreds. Under the program, homebuyers Federal Credit Union of Heath, Ohio Christine Busheme, vice president of have an opportunity to borrow up to (mid-size), and Topmark Federal Cred- mortgage services at the Central Flori- 90% of the purchase price or appraised it Union of Lima, Ohio (small). da-based CU. Fairwinds was recognized value, whichever is less, with a low-rate Purchase lender awards go to CSE at the Credit Union World Conference, mortgage (and without requiring pri- Federal Credit Union of Lake Charles, Busheme says, for results including its vate mortgage insurance). Louisiana (large credit unions), Lake- largest mortgage disbursement month The buyer can also obtain a home view Federal Credit Union of Ashtabu- of record; a 100 percent increase (year improvement loan in the form of a sec- la, Ohio (mid-size) and Dynamic Feder- over year) in disbursement volume; a ond mortgage to make needed home al Credit Union of Celina, Ohio (small). doubling in purchase percentage of its repairs. There is no payment due and pipeline; 25 percent annualized port- no interest charged on the second TELL US ABOUT YOUR SUCCESS folio growth and $750 million in con- mortgage unless the first mortgage is We publish news pertaining to suc- sumer real estate property paper under refinanced, the home is no longer the cesses achieved by our member organi- primary residence or the home is sold. management. Busheme also reports zations (not individuals), including in- l that Fairwinds’ first loan under the new creased market share and loan volume. TRID rules made it from application to CUMAnet, the East Coast mortgage Send your success stories to bob.dorsa@ closing queue submission in nine days. CUSO, has launched an Affordable acuma.org and include what (be specif- l Housing Platform for low- to moderate- ic), when and where. Deadlines are May In November, Five Star Credit income mortgage borrowers. CUMAnet 15 for the July issue and November 15 Union completed the purchase of Farm- notes that the innovative and compre- for the January issue. ers State Bank of Lumpkin, Georgia, hensive platform will make home own- and converted its customers to mem- ership more accessible to underserved populations.

January 2016 - PIPELINE 5 HOME MORTGAGE DISCLOSURE ACT

Compliance Challenges A Look at Pressing Issues Affecting Credit Unions By Kris Kully

fter years in the shadows, the Home Mortgage Generally, agencies have used HMDA data as an initial screening tool, Disclosure Act (HMDA) is back. The Consumer to target certain lenders for further Financial Protection Bureau (CFPB) issued a final rule scrutiny. That scrutiny is often a pain- A ful, lengthy and expensive process that (www.consumerfinance.gov/regulatory-implementation/ can threaten a lender’s resources and hmda/)in October addressing every aspect of collecting reputation. and reporting residential mortgage loan data—including who, what, when and how. FAIR LENDING QUESTIONS Since the new data will include cred- In short, credit unions that report ment will do with all the additional it score, ratios, and the loan’s rates and HMDA data will have to report a lot data. HMDA data are used not only by fees, plus denial reasons (the reporting more data in the coming years. (The regulators for compliance purposes, but of which will become mandatory), the rule’s collection requirements begin in also by the public—including research- agencies could refine their screening January 2018.) Some impacts of the ers, community groups and lawyers. process and target fewer lenders for that rule are obvious, while others are hard The new data fields will include a mem- onerous additional scrutiny. However, to predict. ber’s age, credit score, debt-to-income those agencies could instead feel em- (DTI) ratio, address and home value. boldened by the additional data to pursue even more aggressive investigations. SIGNIFICANT CHANGES AHEAD There are many more details to The rule’s new data mandates will PRIVACY CONCERNS ABOUND absorb about the upcoming HMDA obviously require significant and costly The CFPB has not yet decided how reporting changes—like the manda- systems changes. The rule requires 25 much of that sensitive information will tory reporting of certain preapproval new data points, and mandates the re- be made public. Wily data crunchers requests. Unfortunately, several sig- porting of others that were previously could likely discover very personal in- nificant details, including which data optional. Although we just implement- formation about individual homeown- will be disclosed and how the CFPB’s ed the new Loan Estimate and Closing ers, if all or even part of that additional planned Web-based data submission Disclosures (TRID), we must now revisit data is disclosed. Credit unions have tool will work, are still unknown. our application and origination process- developed trusting relationships with I predict that any piecemeal release es and systems again, and start another their members and take the protection of needed guidance, and any resulting conversation with relevant vendors. of their privacy seriously. The CFPB course corrections, will cause us many Recently, CFPB Director Richard must carefully weigh the public’s need headaches in the years to come. Cordray asserted that even with the lead for aggregated information about mort- time for TRID implementation, vendors gage lending against each individual Kris Kully is a partner at K&L Gates were not prepared, causing delays and homeowner’s right to privacy. LLP. Her legal practice focuses on fed- risking compliance violations. The two It’s also difficult to predict how the eral and state regulatory compliance years until the HMDA rule kicks in will government will set fair lending pri- issues affecting providers of consumer fly by, and this time regulators may have orities. The government has historically financial services. She advises clients even higher expectations for readiness recognized that HMDA data is insuffi- on compliance with licensing, consumer and lower tolerance for errors. cient to prove discrimination, since it protection and other practice require- While the up-front burdens of sys- does not reflect all the legitimate fac- ments including residential and com- tems and process changes are obvious, tors that go into an underwriting or mercial mortgage lenders. it’s harder to predict what the govern- pricing decision.

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Making a Difference Honors, Awards and Recognitions for Individuals and Organizations

“I love to help people,” Sykes tells l CUNA. “And now I’m able to focus on John Murphy, vice This issue marks the debut of our my passion—housing—as well. We president of mortgage new “Making a Difference” column for never tell members ‘no,’ on a mortgage. lending at Consum- people and organizations within our We might tell them ‘not now.’ ” ers Credit Union in industry space. We will continue to She founded the Albany-based Cred- Oshtemo, Michigan, publish this column in coming issues of it Union Real Estate Network and serves has earned the Certi- on the advisory board of PHH Mortgage fied Mortgage Banker The Pipeline. For information on how to Murphy submit news, please check the italicized and Arch Mortgage Insurance. Sykes is designation from the paragraph at the end of this article. (The also a member of the Rensselaer County Mortgage Bankers Association. Mur- Pipeline will also carry news of “industry Housing Resources Board. phy was one of 17 individuals honored l successes” in a separate column.) for receiving the CMB designation, the l Lori Norby, branch highest professional honor in the real manager and mortgage The Fort Collins Board of Realtors estate finance industry, at the MBA’s an- loan officer in the CU awarded its 2015 Af- nual conference in October. Mortgage Direct office l filiate of the Year honor in Madison, South Da- to Dave Armstrong, Deb Flettre, regional mortgage loan kota, has been recog- mortgage loan origina- sales manager for Royal Credit Union, nized as a top mortgage tor at Boulder-based El- has been named Chamber Member of Norby originator by the state’s evations Credit Union. the Year by the Hudson, Wisconsin, Housing Development Authority—the He was honored for in- Chamber of Commerce. Armstrong eighth time she has been so honored. tegrity, commitment to The award recognized a Lori excels at promoting first-time buy- excellence, professionalism and dedica- member who has donat- er mortgage programs and home buy- tion to the Northern Colorado real estate ed their time to cham- ing in her community, says CU Mort- community. ber events. “I am fortu- l gage Direct COO David Bednar. nate to be able to work l Alissa Sykes, vice president of lend- for an organization that Annual awards for excellence in Flettre ing at Sunmark Federal Credit Union in supports giving back to mortgage lending were announced Albany, New York, has been recognized the community and allows me to put in in November 2015 at the 11th annual as a “Woman to Watch” by the Credit the time and effort,” says Flettre. myCUmortgage Partner Conference. Union Times. Credit unions received awards in a Sykes was cited for TELL US ABOUT YOUR NEWS number of categories from myCUmort- her “dedication and We publish news of credit union real- gage, a CUSO serving nearly 200 credit leadership in exploring estate industry honors, awards and recog- unions and owned by Dayton, Ohio- the possibilities that nitions of individuals and organizations. based Wright-Patt Credit Union. have helped Sunmark We also publish news of housing-related Honored as origina- community recognitions, such as Habitat FCU develop innovative Sykes tor of the year are Tim- for Humanity projects and National Asso- solutions that deliver othy Muffley, DESCO ciation or Realtors cooperative ventures. on local consumers’ lending needs.” Federal Credit Union, Send your news to bob.dorsa@acuma. In addition, she was names a “CU Portsmouth, Ohio (large org and include who, what (be specific), Rock Star” by the Credit Union Na- credit unions); Wendy when, where and, if desired, a head-and tional Association (CUNA), which shoulders photo (150 dpi), identifying the Bussa, Hopewell Fed- noted that she “has successfully—and Muffley person being honored (name, title, orga- eral Credit Union, quickly—wound her way into what she nization) on a piece of paper taped to the Heath, Ohio (mid-size); and Michelle describes as a position that perfectly back of the photo. Deadlines are May 15 Boughan, Topmark Federal Credit blends her personal desires and profes- for the July issue and November 15 for Union, Lima, Ohio sional skills.” the January issue.

8 PIPELINE - January 2016 2016 ACUMA Workshop

Each year, ACUMA offers challenging workshops on mortgage-lending focused topics. These two-day sessions offer a chance for credit union folks to dig a bit more deeply into today’s challenges and opportunities. n These meetings provide time for listening, asking questions and networking with like-minded professionals and industry experts. n ACUMA loves hosting these sessions, and attendees rave about the value they bring. This year, the two locations for the program also provide a bit of Southwestern hospitality. n Don’t wait—space is limited. Registration for members costs just $525 and ACUMA provides breakfast and lunch both days, as well as a hosted reception the first evening.

Tempe, Arizona San Antonio, Texas May 18-19 June 21-22 Mission Palms Hotel Westin Riverwalk Hotel

Check the Event Calendar page on the www.acuma.org website for registration information and detailed listings for workshop topics. CREDIT UNION ADVOCACY: FOR NOW, ALL EYES ON NCUA

Regulation and Legislation An In-Depth Look at Issues Affecting Credit Unions at the Federal Level By John J. McKechnie NCUA CONSIDERS RULE CHANGES ynics like to say that Congress is dysfunctional, Just because Congress is not pass- gridlocked, and just plain can’t get anything done. n You ing bills that will affect credit unions know what? They’re right. Or at least partially right. doesn’t mean that all is quiet on the C federal front. NCUA is in the process of While Republicans have majorities Trust Fund. Fannie and Freddie would approving an ambitious and far-reach- in both chambers, they are unable to be required to create a risk-sharing ar- ing slate of rule changes that will grant pass legislation that would be signed rangement with private investors, and significant new flexibility for credit into law by President Obama, render- the Treasury would be prohibited from unions in the areas of business lending, ing all but the most innocuous propos- selling its shares in Fannie and Freddie field of membership and capital. als pointless to pursue. until authorized by Congress. Here’s a laundry list of regulatory Attempts at housing finance reform This reg relief legislation was ap- relief items NCUA is working on: in this Congress have been anything proved by the Senate Banking Commit- A proposed Field of Membership but innocuous, but still bear close mon- tee on a party-line vote, and is unlikely rule was approved unanimously in itoring by the credit union mortgage to become law unless it is attached to November. This update of several im- lending community. a larger bill (possibly a spending bill portant definitions and rules of the that would keep the government run- road, including community charter ning) sometime at the end of the year. TIP (Trade, Industry or Profession) and REGULATORY RELIEF LEGISLATION Stay tuned—there may be an opportu- what constitutes a service facility, will Senate Banking Committee Chair- nity for credit unions to weigh in with provide credit unions with significant man Richard Shelby (R-Ala.) has pro- grassroots support for the most helpful flexibility in determining how to reach duced regulatory relief legislation provisions. the consumer marketplace. aimed at paring back mortgage-related Supplemental capital rulemaking is portions of Dodd-Frank. The bill, expected to been taken up by the board passed by the committee in July, re- in the next few months. forms Qualified Mortgages (QM) and The final Member Business Lend- mortgage servicing assets. In addi- ing regulation, which updates the way tion, the measure requires the Federal NCUA regulatory in which credit unions make loans to Housing Finance Agency to shelve a members for business purposes, should proposed change in FHLB member- relief efforts are be voted upon in February 2016. ship requirements pending the results What do these regulations have in of a GAO study, and would give credit guaranteed to common? First, they are all designed at unions parity with banks in the Fed- generate a strong removing burdens, or modernizing the eral Home Loan Bank Act definition of regulatory framework overseeing credit “community financial institutions.” political pushback unions. Second, and perhaps more sig- The Shelby bill also contains a num- nificantly, they are guaranteed to gener- ber of provisions that would set the from the banking ate a strong political pushback from the stage for larger GSE reform. industry. banking industry. Language in the bill bars Fannie Banks responded in an overwhelm- Mae and Freddie Mac from using fu- ing and unprecedented way during the ture G-fee income from increasing comment period for the MBL rule this their contributions to the Housing summer; 93% of the more than 3,000

10 PIPELINE - January 2016 CREDIT UNION ADVOCACY: FOR NOW, ALL EYES ON NCUA

The bank lobby has letters received on the rewrite were inserted itself into Grassroots political activism has been from bankers or bank trades, and all of the hallmark of the credit union move- those expressed strong opposition. every credit union ment’s advocacy efforts, but the bank- And the FOM proposal is encoun- ers appear energized. They are mount- tering the same levels of bank opposi- policy debate, with ing an all-out effort to define credit tion. Proof? The day before the NCUA an unfortunate unions, and the important regulatory Board voted on the rule, the ABA wrote reform items under consideration by Chairman Matz attacking the yet-un- degree of success. NCUA are the latest battleground. seen regulation, and cc’d key congres- The credit union trades are gear- sional leaders. Expect a well-orches- ing up for a grassroots campaign, and trated, high-decibel banker campaign in the regulatory arena, the bank lobby ACUMA members should step up and against this in the coming months. has inserted itself into every credit do our part to make sure credit unions, The same can be said for Supple- union policy debate, with an unfortu- not banks, are the ones deciding how mental Capital rulemaking when that nate degree of success. Lawmakers on they serve their members. process commences. both sides of the aisle frequently answer credit union requests for regula- John J. McKechnie is a partner at To- tory relief by asking, “What will the tal Spectrum, a Washington, D.C.-based BANKS SEEK TO THWART NCUA bankers say?” Now, those same bankers team of companies providing strategic The common thread here is obvious. are attempting to intimidate NCUA, and counsel and effective plan implemen- Bank grassroots are shifting into high- are counting on being able to drown out tation using advocacy, research, com- gear in an attempt to block any NCUA credit union voices in the process. munications, and political engagement. efforts to streamline credit union ser- Credit unions have an opportuni- You can reach him at (202) 544-9601 or vice offerings. On Capitol Hill, and now ty—no, a responsibility—to respond. [email protected].

January 2016 - PIPELINE 11 IN THE PIPELINE: INSIGHTS AND OBSERVATIONS ON CU MORTGAGE LENDING

servicing activities. In order to admin- ister your responsibility, you will need to develop a strong oversight program to assure that the servicing is being per- Managing Risk formed in accordance with all applicable requirements, as well as in accordance An Alternative to Servicing Your Loan Portfolio with your business strategy. By David J. Miller Jr. BENEFITS OF SUBSERVICING There are numerous reasons to con- Many credit unions today wrestle ary marketing activities. As a result, sub- sider subservicing as an alternative to an with enterprise risk management, focus- servicing has become an accepted form in-house servicing operation. But let’s ing a considerable amount of time and of managing loan servicing activity and start with perhaps the most challenging resources on managing operational risk, has become an alternative to in-house consideration today—compliance. balancing it with the delivery of excep- servicing operations. In today’s environment, the com- tional member service, while still being pliance and regulatory landscape has profitable. become increasingly complex, with in- If those three objectives are high on WHAT IS SUBSERVICING? creasingly frequent updates and chang- your to-do list, you might consider engag- Subservicing is the outsourcing of es. Moreover, the costs for non-compli- ing a third party to handle the heavy lift- traditional administrative loan servicing ance have risen dramatically with higher ing associated with servicing your loan activities to a third party for a fee. The penalties and compensatory fines being portfolio. They can assist you in achiev- portfolio can be serviced on a private la- imposed by the different regulatory au- ing those objectives. So, it might prove bel basis with the servicing branded to thorities and mortgage agencies. worthwhile to invest some time looking provide a high-quality, consistent mem- Can you keep up with the ever- into a partnership with a subservicer to ber experience. changing compliance and investor re- see how they can help you. Subservicers handle all of the tradi- quirements without hiring a small army The subservicing industry has tional servicing activities, from the loan of specialists in your operation? They grown from a small, relatively select closing through payoff, foreclosure or would need to review changes, deter- group of users to a widely accepted form sale of servicing. They manage the core mine operational and technical impact, of servicing for a broad cross-section of servicing activities including member build solutions, and then test to assure financial services participants. Histori- service, default administration, account- that you will be in compliance by the cally, credit unions have been holders of ing and investor reporting, and integra- due date. It’s certainly a daunting task. the mortgage servicing right (MSR) with tion with your in-house systems. And, A relationship with a subservicing some retaining the MSR when they sell of course, they will manage compliance partner that has broad expertise can their loans to Fannie Mae, Freddie Mac and regulatory issues on your behalf. help you achieve these objectives, assur- or Ginnie Mae. The subservicer typically also pro- ing that your loans are serviced in com- Over the last few years, we have seen vides access to loan data, delivery of indus- pliance with all state and federal regula- dramatic shifts in this business with try standard and customized reports and tory parties, GSE, investor and all insur- many credit unions engaging in second- support of management reporting needs. ing entity guidelines and requirements, Perhaps most importantly, the subservicer while delivering a process that is built on will provide 24/7 member support and be best practices. able to measure and deliver the results In your long-term business planning There are numerous through call statistics, turnaround times, cycle, you focus on strategic goals and reasons to consider performance measures, and high-quality actions necessary to manage and control contacts with the member. costs while retaining flexibility in your op- subservicing as an In sum, while you have entrusted erations. Subservicing allows you to lock the daily operational activity and the down your servicing costs while retaining alternative to an responsibility of servicing performance the flexibility to better manage portfolio in-house servicing to a third party, you continue to own volume changes and address compliance- the servicing rights and the member re- related business requirements. operation. The lationship while retaining the rewards and benefits associated with the servic- most challenging is ing asset. IN-HOUSE VS. OUTSOURCED COSTS compliance. Despite the fact that you have out- Typically, working with an estab- sourced the servicing asset, you are still lished subservicing company will be obligated for the performance of the more cost-effective than trying to retro-

12 PIPELINE - January 2016 IN THE PIPELINE: INSIGHTS AND OBSERVATIONS ON CU MORTGAGE LENDING

fit your existing servicing platform to ment loans and better serve your member the changing requirements. The costs base. You will also be able to access spe- for the required servicing technology, cialized housing agency and other financ- Subservicers handle trained staff, different support systems ing programs without having to develop and compliance monitoring make it dif- and support the required servicing for all of the traditional ficult to be cost-competitive without ser- these different products internally. vicing at least 150,000 loans. servicing activities, Using a subservicer enables you to from the loan adjust your volumes more easily in re- SUPPORT FOR SELLING STRATEGIES sponse to changing market conditions Best execution – isn’t that what it’s closing through and secondary market pricing oppor- all about? Many credit unions today tunities, without having to support the who are servicing in-house follow past payoff, foreclosure fixed costs for an in-house servicing op- practice, putting the loans on their bal- or sale of servicing. eration. Taken all together, subservicing ance sheet rather than exploring a broad- can be a cost-effective alternative given er delivery into the secondary market. the resource constraints that you face. And while there are clearly investment Subservicing also allows you to of- considerations, their execution is tied to business as you look for best execution fer new products to your members and a specific delivery method because of ei- for your new originations. expand your services. By working with ther a systems limitation or limited ser- David J. Miller Jr. is Executive Vice an experienced subservicer with a strong vicing knowledge tied to their investor President and Business Development Di- staff and technology, your credit union reporting capabilities. rector at Cenlar FSB, a leading loan servic- can offer a wider range of fixed-rate and A good subservicer will provide the ing provider for more than 40 years. You adjustable-rate loan programs, provide flexibility to support all of your selling can reach him at [email protected]. various types of conventional and govern- strategies as well as supporting your

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January 2016 - PIPELINE 13 IN THE PIPELINE: INSIGHTS AND OBSERVATIONS ON CU MORTGAGE LENDING

Are You Prepared for the Spring Home-Purchase Market? It’s Not Too Soon to Make Product and Services Decisions to Help Members By John Castiello

Although it’s wintertime in Phila- We have adjusted to the regulatory will do to drive purchase business now delphia, crocuses already are starting to changes over the past few years with that the “Fed” has started increasing income up in my garden—very unusual QM and TRID taking up a sizeable terest rates. Are you up for the challenge? weather for this time of year. amount of our time and resources. But While football consumes many folks What does this have to do with mort- now it’s time to get ready for our next time on winter weekends, baseball man- gages? Well, just like the weather, the challenge, one filled with opportunities agers are already working hard behind industry can be very unpredictable and to help your members achieve their goal the scenes to get ready for the spring sea- you never know what new challenges of homeownership and wealth creation. son. Are you doing the same? will come our way. It’s time to start thinking what you Do you have the products and services that your members will require, and the processes in place to manage their expectations? Whether you are coming up with a new portfolio product or getting your systems ready for Fannie Mae’s new HomeReady program, you must be prepared to handle the increase in purchase volume that is coming your way.

WHO WILL YOUR BUYERS BE? What is the best way to assist your members and make the mortgage experience a pleasurable one? Will your spring lineup be able to attract and retain the next wave of homebuyers? Let’s first examine the market (and buyers) and what we will need to do. Retirees are starting to come back into the market since their properties have returned to a positive equity position, and contrary to popular norms, se- niors are buying larger homes.

14 PIPELINE - January 2016 IN THE PIPELINE: INSIGHTS AND OBSERVATIONS ON CU MORTGAGE LENDING

Millennials seem to be our biggest PITI, which includes mortgage insur- target market, but some are still hesitant ance. But this isn’t the entire picture. to buy due to high student debt, lack of Based on the principal reduction and downpayments, concerns over job stabil- downpayment, your member now has a ity or they just do not have an interest in positive equity position of $30,665 and owning after what happened to property at an appreciation rate of 2% annually, values during the last downturn. an additional equity position of $26,020. Diverse Markets are also a great po- The benefits of owning truly surpass tential source of production for us. A sig- the rental option. and that’s not includ- Whether you are nificant number of new household for- ing possible tax saving benefits for those coming up with a new mations in the next 10 years will come that itemize. These numbers also dem- from diverse markets. Are you prepared onstrate the reason to buy now, so that portfolio product with a diverse market strategy to attract your member can get started on the path the Asian, Hispanic and African Ameri- of wealth creation with home prices and or getting your can borrowers entering the market? rates still low. Waiting even a few years systems ready for Having products and programs that to buy could cost them considerably— will meet the needs of these markets will both in financing and appreciation. Fannie Mae’s new be essential for mortgage originations. Fannie Mae’s HomeReady program ad- HomeReady program, dresses some of these issues, especially THE HOMEREADY PROGRAM you must be prepared for diverse markets where there is a In the 2015 homebuyers profile pub- need to use extended household income lished by the National Association of Re- to handle the for purchases. altors, multigenerational households ac- Renters also make up a large seg- counted for 11 to 19% of home purchases. increase in purchase ment of the opportunity for mortgage The overriding factor in these purchases volume that is coming originations, and we need to present a was children purchasing properties with compelling argument for renters to enter their parents to care for aging parents and your way. the purchase market, such as the oppor- save on costs. NAR’s report also breaks tunity for them to build wealth through down the information regionally. real estate rather than enriching others. HomeReady allows for non-borrow- To engage each of these segments er income to be used as a compensating and entice them into the market, we factor for loans with DTIs between 45% must promote the fact that they don’t and 50% (providing that the income is need a 20% downpayment and then at least 30% of the qualifying income demonstrate the financial benefits of in the transaction). It also allows for a purchasing a home vs. renting. Then maximum LTV of 97%. The program cases, larger homes than they have now. your members can see that purchasing a eliminates the Loan Level Price Adjust- Since HomeReady is not just for first- home and starting on the path of wealth ment (LLPA) for loans with a 680 credit time homebuyers, they are a perfect fit creation can happen sooner and be more score and LTVs greater than 80%. for the program. Remember: there are affordable than they realized. Fannie Mae also has reduced the MI AMI restrictions that apply, but 51% off coverage to 25% for loans with LTVs all census tracts are at 100% of the AMI greater than 90%. The pricing advan- or no income limit at all. RENTING VS. OWNING tage due to the reduction of the LLPAs Let’s take a close look at scenario of and the added benefit of the reduced MI renting vs. owning with a 3% downpay- leads to a compelling financing package OTHER STRATEGIES TO CONSIDER ment and a sale price of $250,000. We’ll for loans that meet the Area Median In- Fannie Mae shouldn’t be the only assume a $242,500 30-year fixed loan at come (AMI) limits of the program. product innovator. With your portfo- 4% interest with $5,000 in real estate Millennials with small downpay- lio capabilities and increasing interest taxes and $800 homeowner’s insurance ments are also good candidates for this rates, ARM loans look to be making annually. program. A 97% LTV loan with attrac- their way back. We’ll contrast that with a monthly tive pricing could be just the product to With the agencies only purchasing rent payment of $1,800. get them back into the market. 1-year, 3/1, and 5/1 ARMs, credit unions Based on a five-year pro forma, rent- Recent articles have indicated that have the ability to create ARM products ing the property would require a cash retirees are also coming back into the that are more compelling with prices outlay of $109,800 including the secu- market due to the return of equity in better than agency adjustables. The 3/3 rity deposit. Purchasing the home would their properties. They are looking to pur- and 5/5 ARM are viable alternatives to require total payments of $ 118,000 for chase new housing units, and in some agency loans and provide your members

January 2016 - PIPELINE 15 IN THE PIPELINE: INSIGHTS AND OBSERVATIONS ON CU MORTGAGE LENDING

with more peace of mind around pay- in the various stages of the loan manu- ment adjustments. facturing process. Services from pro- Mortgage insurance also offers a va- cessing, contract underwriting, pre- and riety of options for credit unions that are post-closing quality control, shipping typically seen in only a small number of Fannie Mae and delivery, and secondary marketing lenders. Lender-paid monthly mortgage can all be obtained to assist you during insurance is an excellent product to of- shouldn’t be the only heavy volume periods or to offset your fer with your adjustable rate mortgages, product innovator. fixed costs with variable costs. But you whereas single premium lender-paid MI should be assessing those resources now. is not feasible for portfolio products. The With your portfolio This is the time to get ready for spring. portfolio credit union ARM with month- Plant the seeds for production with your ly lender-paid MI translates into lower capabilities and products and programs. Add any addi- monthly payments and possible addi- increasing interest tional outsourcing needs you may require tional interest deductions, which your to handle the increased volume and watch competitors are probably not offering. rates, ARM loans your loan originations grow! If you have the right products and programs ready, you should see heavy look to be making John Castiello is vice president and volume in the spring, which is a very their way back. managing director at Radian, which pro- good thing but can cause operational vides private mortgage insurance and issues if you aren’t equipped to handle related risk management products and that volume. You may want to consider services to mortgage lenders nationwide. outside service providers to assist you To learn more, visit www.radian.biz.

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16 PIPELINE - January 2016 20th Anniversary ACUMA Conference

In 20 years, the American Credit Union Mortgage Association (ACUMA) has grown from a handful of credit union people trading notes to an organization providing mortgage-lending credit unions access to the industry’s leaders, innovators and their own peers to learn and share the knowledge. ACUMA has built its foundation on education and networking. Now, to celebrate its growth along with the growth of credit union mortgage lending, ACUMA invites you to our nation’s capital to discuss the next steps to keep building on success. Washington, D.C. n September 19-21, 2016

The 20th anniversary ACUMA Conference of the mortgage lending industry. brings you to our nation’s capital to: n Learn more about how to advocate for n Listen to presentations by congressio- credit union mortgage lending and why nal representatives, industry leaders it’s so important to the future. and top government regulators. n Participate in ACUMA’s special 20th n Discuss important mortgage-lending anniversary events, including a clos- issues with your peers, presenters ing-day rooftop luncheon overlooking and a variety of government officials the Capitol and a luxury bus tour of engaged in legislation and regulation this beautiful city.

Near downtown, the high-rise hotel is less than a mile from the White House and just over a mile to the Washington Monument. In addition to conference facilities, the hotel offers three restaurants, a bar, a coffee shop, a full-service spa and a fitness center. For more information about conference registration, visit ACUMA’s website at www.acuma.org and click on Event Calendar. IN THE PIPELINE: INSIGHTS AND OBSERVATIONS ON CU MORTGAGE LENDING

Job Market Weakens but Home Prices Rise in ‘Energy Patch’ States By Ralph DeFranco, Ph.D

It’s been a year and half since energy Texas, New Mexico and Wyoming) has growth has not appreciably slowed and prices began plunging. A barrel of oil that been deteriorating and likely hasn’t hit energy extraction is a small share of sold for $115 in June 2014 was priced at bottom yet. (See Figure 1.) their economic activity. just $35 around the end of 2015. As we Texas employment is trending down- move into 2016, it is worth assessing ward in similar fashion to neighboring employment and housing trends in U.S. EMPLOYMENT TRENDS oil- and gas-producing states. In Figure 2, coal-, oil- or gas-producing regions—the As Figure 1 shows, total employment we take a deeper look at several cities in so-called “Energy Patch”—and studying fell fastest in North Dakota, the state Texas that show the slowdown in broad- the implications for credit unions. that experienced the largest energy-re- based trends. Overall, lower energy prices are con- lated boom in recent years. Our analysis tributing to economic growth, saving the suggests that North Dakota is the most average U.S. family about $550 a year, vulnerable to home price declines since HOUSING TRENDS even as exports have been hurt by a ris- home prices there are now about 20 per- Turning from employment to housing dollar and weakness overseas. The cent higher than what we would expect, ing, the situation in the Energy Patch is U.S. economy is currently generating a given the historic relationship between decidedly mixed: healthy 2.5 million net new jobs a year. income and home prices. • Home prices have held up well, Nevertheless, total employment in California, Colorado and Pennsyl- growing at about the same rate as the the Energy Patch (Alaska, Louisiana, vania were not included in the Energy year before. New Mexico, North Dakota, Oklahoma, Patch charts since their employment

FIGURE 1 EMPLOYMENT CHANGES IN ENERGY PATCH STATES

+5%

+4%

+3%

+2%

+1%

-1%

-2%

-3% Apr 2013 Aug 2013 Dec 2013 Apr 2014 Aug 2014 Dec 2014 Apr 2015 Aug 2015 Nov 2015

Sources: U.S. Bureau of Labor Statistics, Moody’s Analytics, Arch MI

18 PIPELINE - January 2016 IN THE PIPELINE: INSIGHTS AND OBSERVATIONS ON CU MORTGAGE LENDING

• Mortgage delinquency rates have ting back on production as sales have Some boomtowns, such as Williston, actually been improving except in weakened. North Dakota, are very likely to see home Alaska and North Dakota (per the Even though home prices have held price declines, while most of the larger Mortgage Bankers Association 60- up well (Figure 3), it is reasonable to cities will probably experience anemic day delinquency rate). expect home price growth will slow in growth as other sectors of the economy, • New home builders have been cut- these states over the next few years. such as health care, slowly expand.

FIGURE 2 NON-FARM EMPLOYMENT CHANGES IN TEXAS & LIGHT SWEET CRUDE FUTURES PRICE PER BARREL

+15% +10% +5% 0 -5% -10%

$160 $140 $120 $100 $80 $60 $40 $20 $0 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Sources: U.S. Bureau of Labor Statistics, U.S. Energy Information Administration, Moody’s Analytics, Arch MI. Gray bars indicate recessions.

FIGURE 3 HOME PRICE GROWTH IN KEY ENERGY PATCH STATES

+12% +10% +8% +6% +4% +2% 0 -2% 2012Q2 2012Q4 2013Q2 2013Q4 2014Q2 2014Q4 2015Q2

Source: FHFA All-Transaction Index, Moody’s Analytics, Arch MI.

January 2016 - PIPELINE 19

+6% +4% +2% 0 -2%

2012Q2 2012Q4 2013Q2 2013Q4 2014Q2 2014Q4 2015Q2 IN THE PIPELINE: INSIGHTS AND OBSERVATIONS ON CU MORTGAGE LENDING

Certainly home sales will continue regional-wide recession that occurred CONCLUSIONS to lag and the risk of price declines are in the 1980s. Conditions are stronger Figure 5 summarizes our views on elevated, but a widespread housing bust now than in the 1980s, thanks to a more which of the Energy Patch states are is not the most likely scenario. diversified employment base, a well- most at risk of experiencing price de- Fortunately, direct employment in capitalized financial sector (a regional clines and why. fracking was relatively small, except in financial crisis greatly exacerbated the We are most concerned about the thinly populated areas such as western problems in the 1980s), still-affordable less populated states of Alaska, North Da- North Dakota. It is true that boomtowns home prices and spillover benefits of sol- kota and Wyoming because of their high like Williston, North Dakota, are in for id employment growth from the United share of employment in energy extrac- a protracted contraction, but that isn’t States overall. tion and weakness in the jobs market. Figure 6 summarizes our viewstrue on for which most ofof the the Energy larger cities Patch in states the are mostClearly, at creditrisk of unions that are high- We also are concerned about coal experiencing price declines andEnergy why. Patch states. Since the fracking ly concentrated in Energy Patch states mining areas such as West Virginia, boom only lasted three or four years, it need to be especially vigilant with credit since competition from natural gas has We are most concerned aboutdidn’t the less create populated a widespread states housing of Alaska, bub- Northguidelines Dakota and and loan quality control, and hurt coal prices. Other states worth Wyoming because of their highble. share Home of valuationsemployment are infar energy more rea extraction- should and carefully weakness monitor in housing mar- watching are Louisiana, Oklahoma, New sonable now than before the large “Oil ket conditions in their footprint. Mexico andthe Texas. jobs market. Patch” bust in the 1980s. The notable Employment and housing conditions exception is North Dakota, where we es- Ralph DeFranco, Ph.D., is the Housing will likely Weremain also weakare concerned and probably about coal mining areas such as West Virginia, since competition timate that home prices are overvalued Economist for Arch Mortgage Insurance worsen somewhatfrom natural in most gas of the has Energy hurt coal prices. Other states worth watching are Louisiana, Oklahoma, by roughly 20 percent. Company. Patch for severalNew moreMexico years, and particularly Texas. We expect several years of substan- in Alaska, North Dakota, Wyoming and dard growth, but not a repeat of the West Virginia.[ Note: Figure 6 follows. I was able to edit this chart, but please try to make it look good. Thanks. ]

FIGURERISKS 5 OFRISK HOME PRICEOF HOME DECLINES PRICE (FIGURE 6)DECLINES*

Probability Annual of Home Change in State Comments Price jobs** Declines (Nov 15) North We estimate home prices are highly overvalued due to the 46% -2.9% Dakota fracking boom. Mining employment in the nation's largest coal producer has Wyoming 37% -0.7% fallen to 10-year lows. Home price growth is decelerating as low energy prices have Alaska 33% 0.1% waylaid the most oil- dependent economy in the nation. West Coal prices and employment are hurt by competition from 33% -1.4% Virginia cheap natural gas. New At risk of a recession due to government- and energy-related 31% 0.4% Mexico job losses. Total employment fell in the past 3 months and home prices Oklahoma 28% -0.1% are decelerating. Economy is still growing, but new home construction is Louisiana 28% -0.6% down. Employment growth remains weak, but positive in recent Texas 26% 1.5% months. Home prices growing faster than the national average.

* Source: Arch MI. The Arch MI Risk Index® estimates the probability home prices will be lower in two years, times * Source: Arch MI. The Arch MI Risk Index® estimates the probability home prices will be lower in two years, times 100. It comes from 100. It comes from a statistical model based on regional unemployment rates, affordability, net migration, housing a statistical model based on regional unemployment rates, affordability, net migration, housing starts, the percentage of delinquent starts, the percentage of delinquent mortgages, the difference between actual and estimated fundamental home mortgages, the difference between actual and estimated fundamental home prices (based on income), and judgmental adjustments. We prices (based on income), and judgmental adjustments. We do not predict the size of potential home price do not predict the size of potential home price declines, just the likelihood of prices being lower by any amount two years from now declines, just the likelihood of prices being lower by any amount two years from now ** Total year-over-year change in total employment as of November 2015.

[ Note: Resume article text. ] 20 PIPELINE - January 2016 Page 5 STAND OUT as a Market Leader

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ACUMA traveled to the National Association of REALTORS® conference in San Diego in November. Here, representing ACUMA, Jennifer Burlison and Sharon Brazelton from the FHLB Chicago, explain the benefits of partnering with credit unions to a pair of REALTORS®.

Discussing mortgage issues in Washington, D.C., are (from left) NCUA small credit union training coordinator Kathryn Baxter, ACUMA President Bob Dorsa, ACUMA Board Member and Tower Federal Credit Union SVP/CLO Barry Stricklin, NCUA economic development specialist Dominic Carullo and NCUA staff attorney Joe Goldberg. Not shown is NCUA regional lending specialist John Mehmet.

22 PIPELINE - January 2016 ACUMA: WORKING FOR YOU

Attendees at the 2015 ACUMA Conference listen to Jared Ihrig, CUNA’s chief compliance officer, address a general session in Las Vegas. ACUMA: Working for You In 2015, ACUMA sponsored events and held high-level meet- more of a nuts-and-bolts, small-group learning experience on ings to benefit its membership of mortgage-lending credit specific topics. A committed advocate for credit union mort- unions, CUSOs and other mortgage professionals. The 19th gage lending, ACUMA worked to “spread the word” at the annual ACUMA Conference, held in Las Vegas in September, National Association of REALTORS® convention. Later in the brought together nearly 400 mortgage pros to share ideas, year, ACUMA representatives held discussions with NCUA of- learn from nationally known speakers and network with like- ficials in Washington, D.C. In 2016, the ACUMA agenda is even minded individuals. ACUMA held workshops in Boston and more ambitious, culminating with a special 20th anniversary San Francisco during the year to provide opportunities for conference in September in the nation’s capital.

Above: A Boston ACUMA workshop panel of (from left) Alissa Sykes, VP of Lending at Sunmark FCU; Michael Spiellman, VP of Marketing and Business Development at Pathways Financial CU, and ACUMA consultant Tracy Ashfield discuss how to measure mortgage lending success and market share. Right: Brian Sacks, a mortgage origination expert, offers tips on developing successful relationships with Realtors during his workshop presentation in San Francisco.

January 2016 - PIPELINE 23 FEATURE ARTICLE

24 PIPELINE - January 2016 MORTGAGE METRICS TO TRACK PERFORMANCE

The Road to High Performance Credit Union Mortgage Lending

Six Key Indicators Can Help Show You the Way By Nizar Hashlamon and Dan Green Studying credit union mortgage lending performance is more than a hobby for us; it’s an avocation. We’ve been interested in it since we became mortgage lenders—way before online lending was a “thing.” n Maybe that’s just because we’re a couple of mortgage and math nerds. Or maybe it’s because of the gross inefficiency we observed in the lending process early in our careers. n In either case, our goals were to identify a small number of easily derived, directly comparable metrics and track them over time, knowing that credit union mortgage lenders would benefit from the exercise.

January 2016 - PIPELINE 25 MORTGAGE METRICS TO TRACK PERFORMANCE

HOW DID WE GET HERE? he latest result of these efforts is our Our study found that cost-to-close is 2015 High Performance Lending rising, and productivity is dropping. Three Study, a look at credit union lend- factors seem to tell the story of why this is T happening. ing performance for the three years end- ing with 2014. It’s an interesting period of First, credit union mortgage volume, time since it starts with the waning days of on a unit basis, dropped 25% in 2014 the 30-year refinance boom and ends, for while mortgage employment, in absolute now, with the dawn of a mortgage market terms, remained relatively constant. none of us have ever seen: One dominated We suggest Second, purchase loans became 50% by purchase lending in an incredibly com- of the mix for the first time in many years. plex compliance environment. focusing on Purchase loans are harder to make than refinance loans, take longer and are not as opportunity by abundant. WHAT WE MEASURE Third, the compliance environment For our study, we use six distinct Mort- building market appears to be a factor. The compliance gage Performance Indicators (MPIs) for role, on a percentage basis, grew at a faster their simplicity of explanation, calculation share; this means rate than any other in 2014. Is this a trend? and comparability. Four of them are well- an increase in It’s too early to tell, but it’s certainly a data known and well-used: point to watch. n Velocity: The number of days elapsed closed loans. from application to closing. n Pull-through: The ratio of closed loans WHAT’S A CREDIT UNION TO DO? to submitted applications. Reading between the lines, it might appear the message here is “cut your head count,” but that is not n Productivity: Closed mortgage loans per mortgage em- necessarily the case. High performance lending does, however, ployee per month. boil down to one simple equation: productivity. As discussed n Cost-to-close: The sum of mortgage labor costs, direct above, this is reflected in the ratio of closed loans per month to mortgage costs, indirect mortgage costs and mortgage tech- the number of employees that closed those mortgages. These nology costs, divided by the number of closed loans, for a are easy numbers to collect, and the math is elementary. 12-month period. (This is Nizar’s favorite metric.) Is this ratio hard to adjust? It can be. Old school mortgage banking suggests dealing with head count first—the denomi- The other two MPIs aren’t widely used in the industry, nator in the productivity equation. While this can be an im- though they serve to provide some behavioral explanations mediate short-term fix, remember that we are in uncharted for the other four as well as additional insight into market territory. dynamics: Wide swings between purchase and refinance are a thing n Member Mortgage Share—The ratio of closed loans in a of the past, and the regulatory and compliance environment is calendar year to the number of members reported on the more complex than ever before. No one has much experience December 31 NCUA 5300 Report. in this strange, new world, and there is even less data, so it n Mortgage Employees Per Thousand Loans Closed—Di- is impossible to determine optimal staffing levels. Old-school vide the total number of mortgage employees by total loans rules may not be the best answer. closed annually. Multiply by 1,000. You might say these six MPIs are too simple or too high- level. They are intentionally designed to be directionally cor- BUILDING MARKET SHARE rect and diagnostically oriented, which means two things. First, We suggest focusing on opportunity by building market they provide a strong indication of actual performance, and share; this means an increase in closed loans—the numerator second, they should lead to further interrogation. in the productivity equation. We should remember that, while Every mortgage lending credit union can, and should, cal- overall mortgage industry volume is down, credit union lending culate these metrics in-house using a more detailed level of fi- opportunity is up as illustrated by the member share MPI. It nancial and statistical data than is available to us. And review- declined to 0.79% in 2014, down from 1.31% the previous year. ing the study’s results should lead to questions, lots of ques- CUNA and Affiliates research explains the drop. Member- tions, which in turn should lead to action, and plenty of it. ship in 2014 grew at a pace faster than at any time since 1994. New members mean new households, which brings new mortgage opportunity and the chance to increase productivity. With credit union membership up, there is even greater opportunity. Today’s new households are being formed by

26 PIPELINE - January 2016 MORTGAGE METRICS TO TRACK PERFORMANCE

SIDEBAR MORTGAGE PERFORMANCE INDICATORS What Are They and How Do They Match Up with Your Operation?

The 2015 High Performance Lending Study by Accen- cerned. It is also an indicator as to how well a credit union is ture Mortgage Cadence examines credit union lending per- serving its members. formance for 2012-2014. The study uses six Mortgage Per- Desired Result: Here, too, the larger the number, the bet- formance Indicators (MPIs). Here are some key elements of ter. Results over the past several years range from a low of the MPIs: about 1.5 to a high of just over 9, with the current average in the mid-3s. VELOCITY The Calculation: The number of days elapsed from ap- COST-TO-CLOSE plication to closing. The Calculation: The sum of mortgage labor costs, di- Desired Result: Fast and furious. This MPI ranges from rect mortgage costs, indirect mortgage costs and mortgage rapid closes in the 40-day range to slower closes exceeding technology costs, divided by the number of closed loans. All 70 days. Does closing faster help with figures are for a 12-month period. pull-through, productivity, and cost-to- Desired Result: Low, lower, lowest. close, resulting in better price if sold The lower the cost-to-close, the more in the secondary market? Logically, it profitable and competitive the mort- should, though finding direct correla- gage operation. Cost-to-close increased tion has been elusive. These six indicators in 2014 to the $4,000 range, to no one’s provide a strong great surprise, but to everyone’s chagrin. PULL-THROUGH indication of actual The Calculation: The ratio of closed MEMBER SHARE loans to submitted applications, includ- performance The Calculation: The ratio of closed ing To Be Determineds (TBDs)—appli- loans in a calendar year to the number cations that, at the time of origination, and should of members reported on the December lack a property address. They are in- lead to further 31 NCUA 5300 Report. cluded here because they represent real Desired Result: Bigger is better. opportunity, even if that opportunity interrogation. That said, this is a “small-result” calcu- might not present itself for another 12 lation. The industry average is approxi- or 18 months. Yes, they have a delete- mately 0.79%. Very few credit unions rious effect on this MPI. The point is, achieve a score better than 2.25%, so however, that borrowers behind TBD not only is it small-result, but narrow- applications must be nurtured because many of them will range as well. Like pull-through, this MPI is an opportunity turn into homeowners, and, therefore, borrowers. Remem- indicator, and, judging by 2014 results, credit unions have ber: A mortgage does not serve a purpose (service to the plenty of opportunity. member or revenue to the credit union) unless it closes. Desired Result: The higher the percentage, the better. Calculated this way, credit union pull-through takes place EMPLOYEES PER THOUSAND CLOSED LOANS in a wide range—from slightly less than 20% to more than The Calculation: Divide the total number of mortgage 80%—with most hovering around 40%, which has changed employees by total loans closed annually. Multiply by 1,000. little over the past six or seven years. There is opportunity in The Desired Result: This metric was introduced this this metric; pull-through ought to exceed 60%, and we ought year, so it is hard to know in what range this MPI ought to to make getting there a goal. It is one sure way of improving fall. Like cost-to-close, it shares an inverse relationship with productivity and expanding market share. productivity, so, when productivity is high, employees per thousand loans closed ought to be low. Last year this measure dropped into the low 20s. The previous two years it PRODUCTIVITY landed in the mid-teens, a much better result since smaller The Calculation: Closed mortgage loans per mortgage is better. With another year of data under our belts in 2016, employee per month. This is the single most important met- we ought to be able to draw some conclusions on the range ric in the entire industry as far as high performance is con- for this metric.

January 2016 - PIPELINE 27 WeWe areare allall taughttaught toto shareshare atat anan earlyearly age...

ButBut whywhy shareshare youryour MEMBERMEMBER withwith youryour LENDER?LENDER?

CreditCredit Unions Unions naturally naturally share share ideas, ideas, strategies,strategies, andand bestbest practices,practices, butbut shouldshould never havehave to to share share their their members. members.

AsAs statedstated inin ourour contract,contract, GuildGuild MortgageMortgage CompanyCompany willwill notnot sellsell servicingservicing to your competitorscompetitors andand willwill notnot crosscross sellsell youryour members.members. YourYour membersmembers remainremain your members.members.

WeWe provide provide an an ideal ideal platform platform for for creditcredit unionsunions involvedinvolved inin thethe mortgagemortgage businessbusiness with aa wide wide range range of of secondary secondary and and capital capital marketmarket options.options. WithWith overover 5050 yearsyears experience asas a a mortgage mortgage banker, banker, we we strive strive toto bebe youryour partnerpartner inin mortgagemortgage transactions.transactions.

PartnerPartner with with Guild Guild Mortgage Mortgage Company Company today. today. 858.790.0701 858.790.0701 www.guildcorrespondent.comwww.guildcorrespondent.com

GuildGuild Mortgage Mortgage Company Company is isan an Equal Equal Housing Housing Lender. Lender. Guild Guild Mortgage Mortgage Company Company NMLS NMLS #3274 #3274 For For use use by by Real Real Estate Estate Professionals Professionals only. only. Not Not intended intended forfor generalgeneral publicpublic useuse oror distribution.distribution. AZ BK# 0018883, OROR ML ML 176. 176. Licensed Licensed by by the the Department Department of of Business Business Oversight Oversight under under the the California California Residential Residential Mortgage Mortgage Lending Lending Act. Act. Regulated Regulated by by the the CO CO Division Division of of RealReal Estate.Estate. GuidelinesGuidelines subjectsubject to change without notice We are all taught to share at an early age... MORTGAGE METRICS TO TRACK PERFORMANCE

the Millennials, the single largest generation since the Baby Boomers. Here’s where old-school rules may still apply: the mortgage is the gateway transaction to many other financial service needs. Grant Servicing for Credit the mortgage, open the checking account, issue the Unions by Credit Unions credit and debit cards, open the next car loan. Homeown- ers have a cornucopia of fi- The name CU Servnet is new but we’ve been helping nancial needs. That’s why credit unions gain mortgage loan servicing for years. seizing this opportunity is so important. (For more in- If you work on one We began 10 years ago as Prime Alliance Loan formation on this topic, visit Servicing Powered by Cenlar. the Accenture Mortgage Ca- thing this new year, dence website.) work on mortgage CU Servnet creates mortgage loan servicing solutions through its partnership with Cenlar. Each credit FOCUS ON PRODUCTIVITY lending productivity union can create its own customizable solution that We stress productivity by concentrating on offers best-in class servicing with a superior member because of its close relation- experience. Our Enterprise Risk Management (ERM) ship to cost-to-close. Increas- closed-loan volume. program integrates with your credit union to deliver ing productivity decreases cost-to-close. This is so be- a robust and compliant solution that is constantly cause labor is more than monitored to meet all regulatory standards. 50% of the cost side of the But why share your MEMBER with your LENDER? equation. If you use labor Entrust your credit union’s mortgage loan servicing to more efficiently, you save money. One of the great gifts of our long-running research is our produc- us and you’ll have more time to focus on managing and Credit Unions naturally share ideas, strategies, and best practices, but should never tivity/cost curve. We calculate productivity (which is easy), plot it on growing your member relationships. the curve, and estimate cost-to-close. have to share their members. We can then use the curve to visualize what’s possible with an increase in productivity. Simple yet powerful, this is one of the most important outcomes of this research, and one of the key reasons why As stated in our contract, Guild Mortgage Company will not sell servicing to your we will continue with it. Look for the results of our 2016 Study, which will be based on 2015 competitors and will not cross sell your members. Your members remain your data. What do we expect to learn? Hard to know for sure. The MBA members. Study of mid-year 2015 showed a decrease in cost to close and a cor- responding increase in productivity. Good news indeed. Not to be a wet blanket, but those results pre-date TRID, which has We provide an ideal platform for credit unions involved in the mortgage business with the potential to impact costs given that everyone—borrowers, Real- tors, lenders, and settlement service providers—have to relearn the a wide range of secondary and capital market options. With over 50 years experience mortgage business. We can’t wait to learn the results, and we’re just as as a mortgage banker, we strive to be your partner in mortgage transactions. eager to share them. The lesson is clear: if you work on one thing this new year, work on mortgage lending productivity by concentrating on closed-loan volume. Do that, and everything else falls into place.

Nizar Hashlamon is Global Head of Sales and Dan Green is Senior Business Operations Manager for Accenture Mortgage Cadence. Call us at 1-877-716-6756 or Partner with Guild Mortgage Company today. 858.790.0701 www.guildcorrespondent.com visit www.cuservnet.org for more information.

Guild Mortgage Company is an Equal Housing Lender. Guild Mortgage Company NMLS #3274 For use by Real Estate Professionals only. Not intended for general public use or distribution. AZ BK# 0018883, OR ML 176. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act. Regulated by the CO Division of Real Estate. Guidelines subject to change without notice January 2016 - PIPELINE 29 FEATURE ARTICLE

30 PIPELINE - January 2016 U.S. MACRO OUTLOOK 2016

U.S. Macro Outlook 2016: The Economy Is in Gear

By Mark Zandi

Moody’s Analytics U.S. Macro Forecast for 2016: n At this point, the best barometer of the economy’s health is jobs. The economy is performing well. n GDP appears understated by missing a significant amount of output in the information technology sector. n If productivity growth doesn’t pick up soon, GDP will struggle even more. n The decline in oil prices and investment in the energy industry may provide a boost to productivity. Productivity also should benefit from a more educated and mobile workforce. n Business formation has meaningfully picked up; animal spirits are coming back to life.

January 2016 - PIPELINE 31 n

U.S. MACRO OUTLOOK 2016

epending on who you listen to and what economic data you look at, the U.S. economy is either struggling to kick into gear or is already in high Dgear. n For those down on the economy, there is GDP. Real GDP expanded by just over 2% last year, about the same lackluster growth experienced during the current expansion. And growth appears to have tailed off at year’s end, tracking closer to 1% in the final quarter. Much of the recent GDP weakness is related to less inventory accumulation, which is a temporary drag, but a widening international trade gap will prove a more persistent impediment to growth given the global economy’s ongoing struggles and the strengthening U.S. dollar.

For those upbeat on the economy, on the power of that technology, there is the job market. The economy which in the case of info processing is creating lots of all kinds of jobs. equipment is measured in large part Payrolls swelled by 2.7 million last by the speed of semiconductors. Dur- year, on top of 3.1 million in 2014. ing the late 1990s technology boom, This is the best consecutive two-year The contraction chip speed was increasing rapidly, re- performance since 1998-1999 during sulting in double-digit measured price the tech stock bubble. There are no in oil prices and declines. Real investment thus soared. bubbles today. Unemployment and investment in the Today, measured prices for info underemployment, which includes processing equipment are actually part-timers who want more hours and energy industry increasing, according to the BEA. Not those who have stepped out of the because chip technology is no longer workforce but say they want to work, may also provide advancing, but because the chip mak- are falling fast at the current pace of ers are less focused on chip speed and job growth. The economy will soon re- a boost to more focused on other features of the turn to full employment. chips that aren’t being captured, such So which is it: Is the economy productivity. as battery life and the versatility of performing well or not? In my view, those chips. Measured real investment at this point in the expansion the best is thus expanding slowly, which is cut- barometer of the economy’s health is ting into measured GDP. jobs. The economy is performing well. Capturing the improving power and quality of business software is also difficult, which has become especially important since investment in software has UNDERSTATED GDP recently surpassed that in info processing equipment. Supporting this perspective is that GDP appears under- An even more vexing measurement problem plaguing the stated. In the Bureau of Economic Analysis’ tally of GDP, the GDP numbers may be that posed by the explosive popularity agency seems to be missing a significant amount of output in of social media and other digital content. Namely, that due to the information technology sector. This measurement problem the introduction of new products, especially of those that are is getting worse as this part of the economy grows bigger. free or nearly so. Snapchat, for example, is all the rage, particu- This is clearest with regard to business investment in infor- larly among young people, and it is free. It is unlikely the BEA mation processing equipment. Real investment is derived by is measuring the impact of Snapchat-like new products in its deflating nominal investment by its price. The price depends price and GDP estimates.

32 PIPELINE - January 2016 U.S. MACRO OUTLOOK 2016

HAS TECHNOLOGY CHANGE This is half the 2% per annum GDP FIGURE 1 COME TO A STANDSTILL? growth that Moody’s Analytics and others, including the Congressional Budget Office and Social Security Administration, are as- Info processing deator, % change yr ago, 4-qtr MA suming through decade’s end. The implica- 4 tions of the difference between 2% and 1% 2 per annum growth for living standards, the 0 fiscal outlook, and asset returns and house- -2 hold wealth are dark. Whether the economy continues to per- -4 form well thus critically depends on whether -6 productivity growth soon revives. It should. -8 Various cyclical forces have conspired to -10 weigh on productivity growth in recent -12 years, and they are set to lift. -14 80 85 90 95 00 05 10 15 FINANCIAL REGULATION Sources: BEA, Moody’s Analytics Especially notable is the impact of the sea change in the regulation of the financial sys- The upshot is that inflation has probably been meaning- tem in the wake of the financial crisis. The fully weaker and real GDP growth stronger during the recovery Dodd-Frank regulatory reform has forced enormous changes than the BEA’s data currently suggest. Future revisions to the on the system, including requiring the nation’s biggest banks GDP data will likely bear this out. to hold substantially more capital and increase their liquid- ity. The bank stress-testing process has also fundamentally changed risk management practices in many institutions. PRODUCTIVITY SLUMP The regulatory changes have put the financial system on The difference between pedestrian GDP growth (even after much firmer ground, but they have also undermined produc- abstracting from the measurement problems) and strong job tivity in the financial sector. Indeed, nonfinancial corporate growth is evident in slumping productivity. During the current productivity growth has held up much better than nonfarm expansion, overall nonfarm business productivity has expand- business productivity, expanding by 1.75% per annum during ed at an anemic near 1% per annum pace, and an even weaker the expansion. 0.5% pace in the past several years. The financial sector’s adjustment to the new tougher reg- This compares with productivity growth of near 2% per an- ulatory regime is finally winding down, suggesting that pro- num on average since World War II, and is the worst productiv- ductivity gains should normalize. Our working assumption is ity performance since the late 1970s. The 1970s were plagued that financial sector productivity will soon be expanding at the by oil embargos and spiraling energy costs, which made much same pace as productivity in the nonfinancial sector. Through of the nation’s capital stock obsolete. That’s clearly not a viable explanation today given FIGURE 2 FINANCIAL SECTOR WEIGHS the slide in oil prices. HEAVILY ON PRODUCTIVITY Weak productivity hasn’t been much of a concern during this expansion. With so Labor productivity, 2009Q2=100 many unemployed and underemployed, the 114 number-one priority has been getting back to Nonfarm business full employment. But with full employment 112 now coming into view, if productivity growth 110 Nonnancial corporate doesn’t pick up soon, GDP will struggle even 108 more. GDP growth will be constrained by the 106 sum of the growth in the labor force and pro- 104 ductivity. Given demographic trends, labor 102 Avg annual growth during recovery: Nonfarm business = 1.1% force growth is set to slow to near 0.5% per 100 annum by the end of the decade. If productiv- Nonnancial corporate = 1.75% ity gains remain stuck at their current 0.5% 98 per annum, then GDP growth will throttle 09 10 11 12 13 14 15 back to a scarily anemic 1% per annum. Sources: BLS, Moody’s Analytics

January 2016 - PIPELINE 33

Number of establishments, % change yr ago, 4-qtr MA 6 5 4 3 2 1 0 -1 90 95 00 05 10 Sources: BLA, Moody’s Analytics LOOKING FOR PRICING THAT WON’T WAVER? PARTNER WITH CERTAINTY

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© United Guaranty Corporation 2016. All rights reserved. United Guaranty is a marketing term for United Guaranty Residential Insurance Company and United Guaranty Mortgage Indemnity Company. 230 N. Elm St., Greensboro, NC 27401. Coverage is available through admitted company only. United Guaranty, Partner with Certainty, Performance Premium, and United Guaranty’s Secure Quote are registered marks. *The quote may change if the loan changes materially or moves from one common industry credit score band to another (as with any private mortgage insurer). The premium rate may improve after additional loan information is added. Labor productivity, 2009Q2=100 114 112 Nonfarm business 110 Nonnancial corporate 108 106 104 102 Avg annual growth during recovery: Nonfarm business = 1.1% 100 Nonnancial corporate = 1.75% 98 09 10 11 12 13 14 15 Sources: BLS, Moody’s Analytics

U.S. MACRO OUTLOOK 2016

the end of the decade, nonfarm business productivity is thus expected to grow at 1.75% FIGURE 3 ANIMAL SPIRITS REVIVE per annum. Number of establishments, % change yr ago, 4-qtr MA ANIMAL SPIRITS 6 The risk-taking necessary to support the 5 innovation so key to productivity growth had seemed undermined by the crisis. The num- 4 ber of new-business establishments, which 3 had been growing by close to 3% annually during the 1990s, and near 2% in the 2000s 2 prior to the crisis, fell sharply during the 1 downturn. Entrepreneurship was sidelined 0 by the tough economy, lack of credit, and dour sentiment. -1 Things have changed. Business forma- 90 95 00 05 10 tion has meaningfully picked up, with the Sources: BLA, Moody’s Analytics number of new establishments growing by close to 2% again in 2015, and accelerating somethings who could not find work stayed in school or went as the year ended. The increase in establishments is evident back. One-third of the employed now have college degrees; giv- across all industries, but is strongest in professional services, en the previous surge in enrollment, this share will continue education and healthcare, and particularly in the software in- to rise quickly. dustry. Entrepreneurship appears to be back. The workforce is also starting to move again. The U.S. job It will take some time for these new businesses to have an market has historically been characterized by significant churn, impact on the aggregate economic statistics, including produc- with millions losing, leaving and taking jobs each month. This tivity. But this is the clearest sign yet that those animal spirits movement enhances productivity as workers move from jobs necessary to drive productivity are finally coming back to life. they do not care for to jobs that better match their preferenc- es and skills. The willingness and ability of workers to move with ease from job to job is a comparative advantage of the ENERGY BOOM-BUST U.S. economy. Mobility, which had declined sharply as a result The contraction in oil prices and investment in the en- of the recession, is now picking up, as is evident from the in- ergy industry may also provide a boost to productivity. Prior creased frequency of quits and hires. to the bust, the fracking boom had lifted energy investment The coming productivity revival is still very much a fore- to its highest share of GDP since the early 1980s. While the cast, with a considerable amount of uncertainty. Much hinges increased oil production has enormous economic benefits, in- on whether and when new technologies come to fruition. Nan- cluding making the economy less sensitive to the energy price otechnology, 3D manufacturing, human-genome sequencing, shocks that have been a catalyst for nearly every modern recession, it also likely divert- ed resources away from investment in labor FIGURE 4 MORE LIFE IN THE LABOR MARKET productivity enhancing investment, such as information processing equipment and R&D. % change, 3-mo MA Now that substantially fewer investment dollars are headed to the energy industry, 8.5 13 more should go into productivity-enhancing 8.0 12 activities. Rising labor costs could further 11 support this shift, as businesses likely had 7.5 become complacent about using labor more 10 efficiently given the heretofore slack job mar- 7.0 9 ket and low wages. 6.5 8 Hires and separations rate (L) 7 6.0 MOBILE AND SMART Quit rate (R) 6 Productivity also should benefit from a 5.5 5 more educated and mobile workforce. An 00 05 10 15 ironic plus coming out of the recession is Sources: BLS, Moody’s Analytics a more educated workforce. Many twenty-

January 2016 - PIPELINE 35 U.S. MACRO OUTLOOK 2016

The upshot is that inflation has probably fracking, drones, and driverless ve- population, central bank behavior, and hicles could be game-changing. How- been meaningfully prices. Our customized models, con- ever, they may not be. Even if they are, weaker and real GDP cise and timely reports, and one of the some well-respected economists argue largest assembled financial, economic that these potential changes pale in growth stronger and demographic databases support comparison with past innovations firms and policymakers in strategic such as the steam engine, the tele- during the recovery planning, product and sales forecast- phone or indoor plumbing. ing, credit risk and sensitivity manage- Moreover, there are those who than the BEA’s data ment, and investment research. Our believe that the productivity slump is currently suggest. customers include multinational cor- here to stay. They argue that produc- porations, governments at all levels, tivity may pick up from its current central banks and financial regulators, moribund pace, but not by much, and retailers, mutual funds, financial insti- certainly not enough to get to 2% GDP growth on a sustained tutions, utilities, residential and commercial real estate firms, basis. The economy is ensnared in so-called secular stagnation. insurance companies, and professional investors. Perhaps, but this would run counter to a constant of U.S. eco- Our web and print periodicals and special publications cover nomic history, namely the ingenuity and creativity of American every U.S. state and metropolitan area; countries throughout Eu- businesses and workers. rope, Asia and the Americas; and the world’s major cities, plus the U.S. housing market and other industries. From our offices Mark M. Zandi is chief economist of Moody’s Analytics, in the U.S., the United Kingdom, and Australia, we provide up where he directs economic research. Moody’s Analytics, a sub- up-to to-the the-minute reporting and analysis on the world’s sidiary of Moody’s Corp., is a leading provider of economic re- major economies. Moody’s Analytics added Economy.com to its search, data and analytical tools. Dr. Zandi is a co-founder of portfolio in 2005. Its economics and consumer credit analytics Economy.com, which Moody’s purchased in 2005. Zandi’s recent arm is based in West Chester PA, a suburb of Philadelphia, with research has focused on mortgage finance reform and the de- offices in London, Prague, and Sydney. More information is terminants of mortgage foreclosure and personal bankruptcy. available at www.economy.com. © 2016, Moody’s Analytics, Inc. and/or its licensors and affiliates (together, “Moody’s”). All rights reserved. ALL INFOR- ABOUT MOODY’S ANALYTICS ECONOMIC MATION CONTAINED HEREIN IS PROTECTED BY COPY- & CONSUMER CREDIT ANALYTICS RIGHT LAW AND NONE OF SUCH INFORMATION MAY Moody’s Analytics helps capital markets and credit risk BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, management professionals worldwide respond to an evolving FURTHER TRANSMITTED, TRANSFERRED, DISSEMINAT- marketplace with confidence. Through its team of economists, ED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSE- Moody’s Analytics is a leading independent provider of data, QUENT USE FOR ANY PURPOSE, IN WHOLE OR IN PART, analysis, modeling and forecasts on national and regional econ- IN ANY FORM OR MANNER OR BY ANY MEANS WHAT- omies, financial markets, and credit risk. SOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR Moody’s Analytics tracks and analyzes trends in consumer WRITTEN CONSENT. Reprinted with permission. credit and spending, output and income, mortgage activity,

All information contained herein is obtained by Moody’s from sources believed by it to be accurate and reliable. Be- cause of the possibility of human and mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. Under no circumstances shall Moody’s have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of Moody’s or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such informat information, or (b) ion, any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if Moody’s is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The financial reporting, analysis, projections, observations, and other information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell, or hold any securities. NO WARRANTY, EX- PRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER. Each opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its own study and evaluation prior to investing.

36 PIPELINE - January 2016 Insertion Date: Client: FHLBank Job Number: 707-1116 Weather Ad 8.5x11 Product/Pub: Revision 1 Revision 2 Revision 3 Revision 4 Size: 8.5" x 11"

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U.S. MACRO OUTLOOK 2016

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THE BRAIN DRAIN BATTLING THE CLOCK By Tom Burton

R G E N T I I T R I E U M R

T R

38 PIPELINE - January 2016 RECRUITING MILLENNIALS

The clock is ticking for credit unions to remain relevant and successful. Every day across the nation thousands of Baby Boomers are retiring, taking with them knowledge and experience that is not easily replaced. n For credit unions the situation is more urgent. The average age of a member is pushing 50, well above the nation’s average. The same is apparent for credit union employees, creating the potential for not only a leadership void, but also a lack of competent employees to keep the operation running smoothly. n How can credit unions reverse this brain drain? The solution lies in the ability to recruit the next biggest generation—the Millennials—to become employees and eventually leaders, and to help attract young members.

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he situation isn’t so dire for tellers or member services timates put the size of the entire generation at more than 90 representatives. Those jobs likely will be filled with will- million) are already a huge factor in our economy--and your Ting bodies as long as the jobs are available. future mortgage-lending success. Their place in your organiza- But the mortgage lending department is another matter tion is only going to become more important with each passing entirely. To fill jobs and retain good employees, credit unions year, month and day. To thrive—no, simply to survive—credit need to re-evaluate hiring, training and retention—and make union mortgage lenders must find ways to appeal to them and necessary changes to keep loan operations running smoothly. bring their talents into the fold. The expectations of Millennials are much higher for the Now—before someone else does. workplace. While many of the current mortgage professionals The stakes are high. As the brain drain of mortgage lend- spent a decade or more learning the ropes before moving into ing employees accelerates over the next few years, Millennials leadership positions, few among us believe the new generation will be making choices on the best places to work (as well as of workers will wait even half that long to gain “meaningful” the best financial institutions to handle their money, loans and jobs before deciding to move on to more challenging and gen- investments). And let’s be honest: would you want to work at a erationally comfortable situations. place where you wouldn’t want to put your money? What can your shop do to ensure that newly recruited Mil- As the clock ticks and the window of opportunity to hire lennials will find the right work culture and attractive jobs to and train those mortgage professionals shrinks, however, stick around and really help you? Can you beat the clock and there are a number of indications that credit unions are fail- attract this group of young adults? ing to attract enough interest from the generation that will The bottom line: If you don’t, your mortgage operation determine future success. may not survive, or at the least, both you and your members According to the Social Security Administration, about will suffer in the years to come. If you haven’t already devel- 10,000 Baby Boomers now retire every day. That works out to oped strategies to bring in the twenty-somethings, train them, a 4-million-a-year employee brain drain for the United States. and keep them happy, then you’re behind in the race and time To replace the value of those workers, you must be prepared runs short. to hire the next generation of mortgage-loan workers at your credit union. No doubt you’ve heard lots of stories about Millennials— WE’RE TALKING BIG the newspapers, airwaves and online world are filled with char- In case you haven’t been paying attention to the constant acterizations of them. Much has been made of this group, the barrage of information about Millennials, let’s take a short first to be born into a post-Internet world where instantaneous timeout to consider some numbers: communications have changed how information is shared. n Millennials now outnumber Baby Boomers. Smartphones. Texting. Twitter. Mobile apps. And more. n They will comprise 40% of the U.S. workforce by 2020— To succeed in recruiting these young employees you must that’s just four years away. understand who they are and what they want. Two important n Currently, 41% of the U.S. population is younger than 30. characteristic that have been consistently reported about Mil- lennials are their desire to be part of a “community” and their The crux of the matter is this: the more than 70 million belief in seeking a positive social impact. Millennials born between the late 1970s and early 1990s (es-

FIGURE 1 A LARGER COHORT Population 5 M

The Millennial 4 M generation is 3 M the biggest in 2 M US history—even 92 M 61 M 77 M bigger than the 1 M MILLENNIALS GEN X BOOMERS Baby Boom. 0 15 20 25 30 35 40 45 50 55 60 65 70 Age in 2015 Source: US Census Bureau

January 2016 - PIPELINE 41 RECRUITING MILLENNIALS

In fact, a 2014 Deloitte survey found that 63% of Millenni- als give to charities and 43% are active volunteers or member Millennials want to have of community organizations. flexibility to achieve work First, you must differentiate yourself as a non-profit credit union—Millennials’ desire to identify with causes and commu- results. They would rather nities gives you the opportunity to differentiate credit unions spend money on a life as non-profit communities, owned by members. This credit union difference can resonate with Millennials, who came of experience than on a age during the 2008 financial meltdown led by Big Banks be- possession. --Hannah Ubl holden to stockholders. The credit union difference is a starting point, but you must also demonstrate that you possess an inviting work environment n And keeping in mind these attributes, Millennials talk for your Millennial employees. about potential employers and spend time researching them online. Ubl’s remarks, explored in more detail in the sidebar “Re- ATTRACTING YOUNG WORKERS cruiting Millennial Employees” on page 45, offer a great base At last fall’s ACUMA Conference, generational expert Han- point to review how your mortgage-lending department works nah Ubl engaged a general-session crowd with ideas about to recruit and hire employees, and more importantly, how you recruiting and retaining Millennial employees. Ubl, herself a can continue to engage and encourage them through a welcom- Millennial, offered some great observations and recommenda- ing culture that values and rewards good work. tions. (See accompanying article, “Recruiting Millennial Em- Culture is extremely important to Millennial workers. Build ployees” on page 45) one that emphasizes inclusiveness and helps them feel part of Ubl also put the audience of nearly 400 mortgage lending a community that makes a difference, such as charity events leaders on the spot when she asked for a show of hands from (You probably already have some.) or recognitions that include Millennials. As heads turned and people searched the crowd a donation to a worthy cause. for a response, only a couple of hands were raised. It was a Take advantage of the skills and insights Millennials bring stark reminder of the work that needs to be done to recruit to the workplace by empowering them to participate and pro- talented young employees. vide feedback channels. Their ideas can help you build better In her conference remarks, Ubl described Millennial attri- processes and offer better products and services to members. butes relating to the workplace: Give them flexibility, too. Millennials are results-oriented. n Millennials want to make a difference in the world. Tell them what you need, and they’ll figure out the best way n Their ideal work environment as “relatable,” “authentic” to get there. Offer them options for the workday. If 9-to-5 and “accessible.” doesn’t work for someone, maybe 11-to-7 would. Explore work- at-home options for a regularly scheduled or occasional time. n They want to have flexibility to achieve work results. Think about how these options can help your business plan. n They would rather spend money on a life experience than In the hiring process, look for diversity. Make sure you are on a possession. thinking ahead to the kinds of members who will be seeking

FIGURE 2 THE FIRST DIGITAL NATIVES

Millennials have grown up with the internet and smartphones in an always-on digital world.

Source: Prosper Insights & Analytics for the Media Behavior and Influence Study

42 PIPELINE - January 2016 RECRUITING MILLENNIALS

FIGURE 3 SOCIAL AND CONNECTED

The online world, and social media in particular, have given the Millennials a platform to reach the world. Source: Prosper Insights & Analytics for the Media Behavior and Influence Study, loans. Your recruiting strategy should attempt to include differences in age, ethnicity and experience. SIDEBAR RECRUITING MILLENNIAL MEMBERS Ask yourself these questions, keeping in mind how they align with Millennials’ values: What is our mortgage-lending mission and vision? What do we STRATEGIES TO ATTRACT MILLENNIAL MEMBERS tell potential employees about careers in our depart- The Filene report, What Millennials Want: The Future of Millennials in the Credit ment, and what do we value in an employee? How Union System, by Andrew Turner suggests some strategies for credit unions to consider does our website portray our department (and the to recruit Millennial members. credit union)? The changes you make to build a culture that TECHNOLOGY ISN’T ENOUGH TO IMPRESS. accepts Millennials and provides a work environ- Going mobile is effectively meaningless as a differentiator because everyone ment that allows them to be happy and “make a dif- should be—and soon will be—doing it. Given that the cell phone is one of the fastest- ference” in the world will also help you to become spreading technologies in history, defining Millennials as the “mobile generation” is more successful. shortsighted. I doesn’t define just them; it defines us all. The bottom line is that you must have an appe- tite to review your operation and the will to make SOCIAL MEDIA IS CRUCIAL FOR ENGAGEMENT. some changes—and soon, while the clock is still tick- Social media can’t be a halfhearted effort or something that doesn’t spring from ing. If you don’t, you’ll be setting yourself up to fail. the authentic nature of the organization. Credit unions that have had success with social media use it as a natural extension of their work, not as a pure marketing effort.

ATTRACTING MILLENNIAL MEMBERS FOCUSING ON PRICE WILL COST YOU THE GAME. Recruiting new members goes hand-in-hand with Let’s stipulate that lower prices and fair treatment are critical. Credit unions must attracting and retaining new employees. It speaks to recognize that these are absolutely essential to recruitment and retention of Millennials. your culture and purpose—that sense of community But that doesn’t mean price and fair treatment are the best differentiators when trying and “making a difference” in people’s lives. to recruit Millennials. If honesty and fair treatment are credit unions’ only calling card, The best opportunity to recruit new members then an honest, inexpensive bank can eat their lunch. Put another way, credit unions is when they are young and looking to build their have to be effective at showing that a credit union is something more than an inexpen- lives—open a checking account, apply for a car loan, sive and fair bank, or they will be unable to compete with such institutions. then look to purchase a home. In the Filene report, What Millennials Want: The In summary, credit unions that capture Millennials and hold them for the long term Future of Millennials in the Credit Union System, au- are those that spend time and effort to deeply empathize with the problems, challenges thor Andrew Turner notes that credit unions have and opportunities that face them, and find ways to offer solutions that only a credit struggled to capture the hearts and minds of those union could. Offering products like small-balance, low-transaction-cost savings accounts, young Millennials over the last decade. preloaded debit cards and credit-builder loans is a good way to start. In the end, banks “After all, the financial meltdown of 2008 should can never be credit unions—and it’s the system’s challenge to make that a living reality have been the turning point for credit unions to for today’s Millennials. overtake banks as the primary financial institution

January 2016 - PIPELINE 43 RECRUITING MILLENNIALS

of choice for young adults,” says Turner, a lecturer at the Uni- n And almost another one-third either didn’t want to bother versity of Wisconsin Law School. But that has not happened. (18.5%) or said credit unions were inconvenient (13.0%). “While the meltdown was complex with many facets and n Only slightly more than one-fourth (27.2%) said they do contributing factors, in the popular reckoning, the cause of the use credit unions. collapse could probably be summed up by a single word— banks,” Turner says. These numbers clearly show that credit unions must do a “And yet the flood of new members has never really hap- better job in getting the word out about the credit union differ- pened,” he continues, noting that as far back as late 2011 the ence. Meanwhile, the clock keeps ticking. Credit Union Times warned that “the window of opportunity Filene reports that one in four Millennials are looking for created by the financial crisis and distrust for banks is closing their first checking account, and three-quarters of those are on credit unions …” shopping for other banking products, such as first mortgages Even though Bank Transfer Day and similar events have and auto loans. encouraged movement away from Big Banks, Turner says, it However, that window of opportunity closes quickly. Ac- would be hard to argue that the fundamental market for fi- cording to a report by Mintel, only 56% of 18-to-24-year olds nancial services has shifted away from for-profit banks toward own any banking product, but 70% of those ages 25-29 do. credit unions. Despite the abundance of opportunity to recruit Millennials, Just being “not a bank” is not enough, Turner says. Credit the 18-to-24 demographic makes up only 9% of credit union unions that succeed in attracting Millennials, he says, “will be membership. those that mesh with Millennials’ lives, thoughts and expecta- And although one-third of Americans are credit union tions, designing products and services that respond to their members, older members are more likely to use them: 38% of worldview, their experiences and the unique pressures they Baby Boomers, 33% of Gen Xers and only 26% of Millennials, face.” (See sidebar, “Recruiting Millennial Members” on page 43) according to a 2014 Harris Poll. But, as Turner says, that won’t be enough to attract new Perhaps credit unions are showing their age. members. As with potential employees, credit unions seeking Time grows short to recruit Millennials—for the mortgage Millennial members must differentiate themselves by stress- department and as members that would seek home loans. ing their cooperative, member-owned mission and the strong Credit unions that fail to act on the brain drain within their sense of community it brings, and then offer appropriate organizations and the decline in numbers of young members products and services to meet their needs in a way banks and may wind up sitting on the sidelines as others take their place. other financial institutions cannot. Examples often cited as Millennial-friendly include fixed-rate and adjustable-rate first Tom Burton is a freelance writer and editor who worked for mortgages, mobile apps for bill payments, use of social media 10 years in the credit union industry. Prior to that, he was an for member communications and embracing diversity. editor and manager at a daily newspaper. In a 2014-15 Google Consumer Survey cited by the Filene report, Millennials were asked, “Why don’t you use a credit To learn more about Filene, which published Andrew Turn- union instead of a bank?” er’s report, What Millennials Want: The Future of Millennials n More than one-third (34.4%) said they didn’t know much in the Credit Union System, visit the website at filene.org. about credit unions.

DIFFERENT % of adults 18-31 married and living in their own household FIGURE 3 PRIORITIES

With less to spend, they’re putting off commitments like marriage and home ownership. Source: Pew Research Center, Current Population Survey

44 PIPELINE - January 2016 RECRUITING MILLENNIALS

SIDEBAR RECRUITING MILLENNIAL EMPLOYEES

UNDERSTANDING THIS YOUNG GENERATION HELPS CREATE A WELCOMING WORKPLACE

By Tim Mislansky Awhile back I wrote about the need to recruit the next generation nators, you must first decide how you can ofof loan originators. I profiled four new originators at Wright-Patt fer them flexibility to achieve this. And you Credit Union and encouraged credit unions to think about how to must remember that they want their work to attract Millennials as loan originators. integrate into their life. In September 2015, I attended the annual ACUMA conference (a must-attend event for credit union mortgage executives) and heard MILLENNIALS ARE AN EXPERIENCE-BASED GENERATION. Hannah Ubl speak. Hannah is a generational expert and works for a Hanna noted that a recent survey showed 74% of Millennials company called Bridgeworks (www.generations.com). would rather spend money on an experience than a physical thing. From the Bridgeworks website, here’s a quote about who they are They want to enrich their lives. Questions you must answer include: and what they do: How can mortgage lending allow them to do this? How can you “There’s one phrase that defines every member of our team: Gen- structure their workday and work life to allow them to experience erational Junkies. And we don’t toss that phrase around lightly. Every more of life? It’s certainly a culture change for mortgage lenders, but Bridgeworks employee is a research hound and generational expert in it’s necessary to attract Millennials. his/her own right. We eat, breathe, and live generations. Seriously. Our friends beg us to stop talking about it during happy hour.” MILLENNIALS DO THEIR RESEARCH ON EMPLOYERS. At ACUMA Hannah certainly lived up to that description. She Hannah also talked about how Millennials research potential talked about how to recruit Millennials and perhaps more impor- employers. They spend time online researching what others say tantly, how to retain them as employees. What did I learn and what about the employer. They look at the employer’s website to see how does it mean for credit unions wanting to be member-friendly? it speaks to them in terms of the workplace environment and allow- There are lots of stereotypes about Millennials—some good, some ing them to satisfy their motivations of changing the world. So make not so good. Here are the key take-aways from Hannah’s presentation. sure the employee/career section of your website tells a story that is relevant to Millennials rather than simply lists the jobs available. MILLENNIALS ARE MOTIVATED DIFFERENTLY THAN Bethpage Credit Union has done an outstanding job of this on OTHER GENERATIONS. their website. Check out the great video Bethpage created to tell its They want to know how they can make a difference in the world. story (https://www.bethpagefcu.com/about-us/careers/working-at- So be sure to connect the dots for them about how helping your bethpage.aspx). The introduction to the video, which features a vari- members with home ownership can have a positive impact on your ety of Bethpage employees talking about the organization, includes community. It’s a fact that home ownership promotes neighborhood this millennial-friendly snippet: growth and stability. And home ownership helps Americans create “… If you want to work in an organization where the desire a source of future wealth. Share with Millennials how they can help to provide world-class service is shared by all your colleagues, make this a reality. and where doing the right thing is more important than corporate profits, then we encourage you to consider a career at MILLENNIALS VALUE THE WORKPLACE ENVIRONMENT AND Bethpage. … We are as committed to our employees as they are WORKPLACE RELATIONSHIPS. to our members.” The top three words they use to describe the ideal work environ- Attracting Millennials to your credit union and to mortgage lend- ment are relatable, authentic and accessible. They want to be able to ing won’t be easy. It will mean many changes in how we think about personally relate to the work they do. They want the work to be real our employees, especially what we expect from them, as well as how and authentic, and they want accessibility to others in the workplace. we recruit them. But it’s necessary if we are going to be successful They want work/life integration (not work/life balance). This means into the future. we need to make sure they understand the higher purpose of mortgage lending at your credit union, and that they are able to create Tim Mislansky is the Senior Vice President and Chief Lending Of- networking opportunities and make friends. ficer of Dayton, Ohio-based Wright-Patt Credit Union, Inc., and Presi- dent of its wholly-owned CUSO, myCUmortgage, LLC. This article has MILLENNIALS DO NOT EQUATE WORKING LONG HOURS AND STICK- been adapted with permission from Mislansky’s online blog. Sign up ING TO A SCHEDULE AS HARD WORK. to follow his blog at mortgagesarememberlicious.com. They want to know what results are needed and be given flexibility to achieve them. If you are going to hire Millennials as loan origi-

January 2016 - PIPELINE 45 the credit union company

ANALYZER THE TOP 300

Opportunity Comes with Challenges in 2016

As credit unions look in their rear-view mirrors, they can 30% of total originations. That means purchase loans are in see that 2015 mortgage loan originations will top 2014 totals. the spotlight: They will be the route to holding—and perhaps This is news to cheer. It shows hard work and determination increasing—market share and loan volume. have paid off. With that route in mind credit unions have the opportuni- Looking ahead to 2016, the question is: Have credit union ty to establish strategies and make plans for the New Year that originations peaked, or can more hard work and determina- will keep them relevant to members and attractive to Realtors tion (and help from a recovering economy) keep them climb- who can partner with them in their local markets. ing higher? That’s a big challenge. It means taking stock of your busi- More importantly, what will it take to keep growing those ness, assessing effectiveness and brainstorming ideas to meet loans? the challenges of the marketplace. Look for ways your products First, consider that the Mortgage Bankers Association pre- and services can meet and exceed expectations for existing dicts that by midyear refinance loans will make up less than (and new) members. TOP 300 FIRST MORTGAGE GRANTING CU MARKET SHARE AS OF SEPTEMBER 15, 2015 $ Originated # Originated $ Outstanding 1st Mortgages 1st Mortgages 1st Mortgages $ Sold (Fixed & Adjustable) (Fixed & Adjustable) (Fixed & Adjustable) 1st Mortgages Total Assets Top 300 1st Mortgages Originated CUs 75,493,571,001 344,359 221,985,943,155 30,148,971,051 688,603,046,251 All Originating CUs (3,328 CUs)* 96,002,327,635 508,971 318,664,230,568 37,103,333,711 1,149,346,061,953 Top 300 Share 78.6 68 69.7 81 59.9 *CUs who granted $10,000 or more 01/15 - 09/15 TOP 300 FIRST MORTGAGE GRANTING CU AS OF SEPTEMBER 15, 2015 $ Originated # Originated $ Outstanding Name of 1st Mortgages 1st Mortgages 1st Mortgages $ Sold Rank Credit Union (Fixed & Adjustable) (Fixed & Adjustable) (Fixed & Adjustable) 1st Mortgages Total Assets 1 VA Navy $9,688,077,585 38,117 $23,827,117,287 $3,549,188,229 $71,967,667,797 2 VA Pentagon $3,139,108,302 8,331 $11,438,980,756 $796,708,270 $19,223,138,716 3 NC State Employees’ $2,227,321,893 14,648 $13,960,161,894 $0 $31,162,020,508 4 CA Kinecta $1,978,515,860 4,854 $1,799,975,784 $1,524,879,865 $3,751,987,558 5 CA First Tech $1,606,475,564 4,522 $3,359,053,455 $575,760,731 $8,335,581,297 6 MI Lake Michigan $1,592,578,607 9,742 $2,269,905,378 $1,285,772,020 $3,920,841,825 7 NY Bethpage $1,274,505,126 3,823 $2,452,913,575 $563,190,056 $6,186,882,226 8 WA BECU $1,209,667,956 4,272 $3,803,773,142 $256,728,209 $13,878,323,252 9 TX Security Service $997,349,355 4,844 $1,663,723,768 $264,718,189 $9,052,442,285 10 AK Alaska USA $941,532,300 3,728 $684,370,394 $886,614,065 $6,309,166,775 11 CA San Diego County $851,037,600 2,359 $3,237,946,807 $118,467,243 $7,094,186,997 12 CA Logix $842,600,781 2,182 $2,189,650,482 $227,845,513 $4,180,508,157 13 CA SchoolsFirst $804,404,986 2,662 $2,502,327,972 $254,505,336 $11,438,769,717

January 2016 - PIPELINE 47 THE TOP 300

$ Originated # Originated $ Outstanding Name of 1st Mortgages 1st Mortgages 1st Mortgages $ Sold Rank Credit Union (Fixed & Adjustable) (Fixed & Adjustable) (Fixed & Adjustable) 1st Mortgages Total Assets 14 CO Elevations $786,900,474 2,777 $604,333,284 $577,486,056 $1,563,584,295 15 UT America First $735,133,288 6,096 $835,166,573 $440,965,667 $7,002,583,992 16 ID Idaho Central $695,424,774 4,189 $743,081,912 $498,726,706 $2,267,420,150 17 OR OnPoint Community $667,606,399 4,682 $1,075,772,103 $330,737,584 $3,838,024,235 18 WI Summit $616,325,372 3,679 $1,021,200,429 $270,328,524 $2,314,532,661 19 MA Digital $600,281,689 1,890 $2,237,024,836 $167,307,376 $6,519,513,295 20 CA The Golden 1 $587,187,278 2,499 $1,922,257,315 $39,622,782 $9,508,199,852 21 CA Star One $528,425,088 1,294 $2,600,329,656 $0 $7,760,198,043 22 IL BCU $526,669,807 2,318 $936,433,467 $341,441,403 $2,255,227,967 23 WI Landmark $524,530,484 3,486 $863,962,173 $375,142,121 $2,844,837,821 24 UT Mountain America $523,934,322 4,168 $1,583,290,038 $264,373,162 $4,823,680,120 25 CO Ent $516,535,327 2,591 $1,762,543,345 $51,278,817 $4,210,491,845 26 TX Randolph-Brooks $507,763,078 3,063 $2,015,229,156 $25,235,964 $6,665,438,060 27 CA Patelco $495,081,268 1,261 $1,623,657,683 $165,938,450 $4,579,181,306 28 WI Community First $494,201,049 3,241 $1,402,432,872 $22,389,450 $2,208,629,836 29 WI University Of Wisconsin $489,124,660 2,604 $385,899,774 $365,013,000 $2,011,360,066 30 MO CommunityAmerica $462,748,796 2,471 $577,507,625 $399,311,809 $2,127,927,016 31 TX University $457,572,570 1,787 $698,034,269 $345,037,713 $1,926,974,175 32 DC Bank-Fund Staff $454,917,894 922 $1,871,887,140 $29,943,067 $4,066,214,702 33 FL Suncoast $410,886,737 2,782 $1,977,962,376 $4,998,622 $6,627,125,361 34 AZ Desert Schools $399,166,767 2,289 $552,969,733 $256,259,972 $3,741,414,265 35 CA Provident $397,576,604 920 $839,646,298 $201,847,235 $2,115,578,034 36 OH Wright-Patt $391,937,508 3,153 $511,070,393 $210,752,092 $3,141,082,530 37 IL CEFCU $381,529,205 2,050 $2,236,955,553 $0 $5,174,819,725 38 NY State Employees $377,557,073 2,396 $726,177,089 $235,150,988 $3,002,250,313 39 NY United Nations $375,490,542 863 $1,253,238,290 $43,411,681 $4,297,007,910 40 CA Mission $373,513,637 1,025 $844,592,228 $151,651,858 $2,797,949,388 41 MN Wings Financial $362,923,710 1,344 $900,001,202 $35,960,548 $4,192,089,211 42 CA Chevron $352,814,861 1,050 $1,878,991,009 $0 $2,696,182,340 43 IL Alliant $351,741,175 833 $3,135,779,762 $145,944,717 $8,463,784,328 44 TN Eastman $347,120,586 2,488 $1,625,827,944 $182,898 $3,225,036,530 45 CA Redwood $336,694,400 1,025 $1,088,430,035 $146,653,250 $2,702,889,934 46 WI Royal $330,333,009 2,005 $717,583,894 $194,175,937 $1,648,265,062 47 IA University Of Iowa Community $328,947,166 1,793 $1,428,877,753 $394,365,670 $3,116,979,243 48 TX TDECU $311,399,555 1,898 $743,427,128 $114,584,169 $2,703,760,660 49 VT New England $302,634,998 1,499 $529,971,010 $168,887,618 $1,084,970,681 50 FL VyStar $299,582,490 2,127 $1,930,396,821 $39,788,863 $5,597,827,037 51 VA Northwest $292,382,719 1,007 $550,401,363 $202,472,873 $2,967,858,506 52 GA Delta Community $291,900,422 1,461 $1,548,179,578 $18,233,508 $4,829,687,878 53 CA Premier America $290,302,865 319 $1,137,185,130 $18,335,800 $2,123,587,994 54 IA Veridian $289,816,030 1,764 $797,830,567 $124,846,582 $2,764,223,380

48 PIPELINE - January 2016 THE TOP 300

$ Originated # Originated $ Outstanding Name of 1st Mortgages 1st Mortgages 1st Mortgages $ Sold Rank Credit Union (Fixed & Adjustable) (Fixed & Adjustable) (Fixed & Adjustable) 1st Mortgages Total Assets 55 NC Coastal $286,069,367 1,164 $757,891,182 $169,988,654 $2,555,294,886 56 CO Bellco $284,929,327 949 $885,016,118 $71,996,848 $3,415,346,354 57 MD SECU of Maryland $276,034,864 1,206 $1,151,365,447 $83,637,000 $2,923,315,047 58 CA SAFE $269,365,142 1,013 $635,357,597 $97,088,649 $2,295,491,716 59 NY Teachers $269,058,150 1,010 $1,157,453,409 $91,151,736 $5,186,292,579 60 CA Stanford $267,675,686 418 $788,560,904 $53,731,007 $1,821,148,446 61 NC Local Government $262,353,144 1,937 $409,185,262 $177,705,449 $1,549,125,464 62 NY CAP COM $261,271,177 1,879 $632,417,109 $122,713,148 $1,226,505,671 63 CA Financial Partners $260,503,109 643 $434,353,081 $143,035,735 $1,058,549,398 64 UT Utah Community $256,859,221 1,383 $210,577,084 $187,471,627 $1,021,629,217 65 CA Technology $255,821,217 379 $788,416,110 $1,356,138 $1,992,618,549 66 CA Wescom $253,572,863 800 $864,220,037 $148,665,364 $3,238,792,671 67 MN TruStone Financial $248,494,446 1,498 $331,386,340 $194,999,788 $1,033,816,109 68 UT Goldenwest $248,442,178 1,131 $322,932,792 $167,672,330 $1,116,488,681 69 MN Affinity Plus $245,336,443 1,494 $424,544,409 $179,571,326 $1,727,177,281 70 WI Altra $242,932,502 1,544 $424,573,694 $135,375,226 $1,114,446,386 71 FL GTE Financial $241,834,521 1,284 $377,431,201 $199,346,063 $1,734,212,997 72 AZ Arizona State $239,597,376 1,162 $559,721,466 $125,659,550 $1,727,005,121 73 NV One Nevada $238,570,083 1,166 $154,348,210 $219,801,643 $749,169,233 74 NY Hudson Valley $238,511,754 1,158 $704,427,535 $142,314,383 $4,239,272,104 75 TX American Airlines $236,973,728 1,173 $1,845,861,296 $0 $6,197,960,940 76 VA Apple $233,901,542 652 $770,158,856 $60,307,152 $2,054,428,831 77 CA California Coast $228,589,246 705 $646,327,246 $62,638,936 $1,947,563,562 78 CA NuVision $228,350,986 655 $504,786,449 $117,518,522 $1,364,308,709 79 PA Citadel $225,405,918 809 $1,046,944,985 $29,925,630 $2,311,370,288 80 RI Pawtucket $218,719,856 1,248 $1,092,707,671 $20,351,752 $1,746,994,401 81 OR Advantis $215,241,282 801 $347,652,222 $167,810,022 $1,206,719,139 82 CA California $213,772,727 518 $499,253,293 $73,696,088 $1,477,482,989 83 MI DFCU Financial $207,662,959 1,333 $632,010,262 $148,790,721 $3,903,703,272 84 IN Forum $205,503,149 1,019 $248,923,739 $161,079,992 $1,095,499,497 85 TX Advancial $203,471,023 703 $429,884,680 $116,866,123 $1,233,240,194 86 CA Partners $201,609,076 681 $427,035,371 $102,821,528 $1,339,435,177 87 WA Whatcom Educational $199,346,199 842 $548,278,435 $110,262,915 $1,173,758,594 88 NJ Affinity $198,524,735 818 $1,303,936,278 $319,525 $2,334,804,075 89 RI Navigant $197,756,849 839 $888,865,393 $34,278,781 $1,532,529,686 90 PA Members 1st $197,596,387 1,070 $578,759,518 $119,700,476 $2,925,371,244 91 FL Fairwinds $192,942,740 1,107 $637,466,871 $11,278,433 $1,899,431,742 92 MI Michigan State University $187,285,351 1,142 $895,724,571 $1,884,600 $2,941,701,573 93 IN Purdue $186,576,557 870 $424,208,015 $75,196,542 $954,237,557 94 NY ESL $184,761,598 1,138 $391,091,021 $124,001,074 $5,542,388,084 95 CA Travis $184,529,381 753 $429,117,845 $87,155,195 $2,475,977,179

January 2016 - PIPELINE 49 THE TOP 300

$ Originated # Originated $ Outstanding Name of 1st Mortgages 1st Mortgages 1st Mortgages $ Sold Rank Credit Union (Fixed & Adjustable) (Fixed & Adjustable) (Fixed & Adjustable) 1st Mortgages Total Assets 96 PA Pennsylvania State Employees $181,271,807 1,849 $790,596,173 $0 $4,326,603,424 97 IN Teachers $181,076,340 1,116 $913,599,090 $2,793,893 $2,781,006,420 98 VA Virginia $180,331,965 1,037 $602,772,829 $56,116,201 $2,809,898,561 99 WA WSECU $179,952,162 873 $494,470,815 $105,924,446 $2,331,518,342 100 NY Visions $179,045,302 670 $1,237,788,980 $11,126,400 $3,457,502,642 101 MD NASA $177,162,197 478 $471,355,669 $88,558,162 $1,663,894,754 102 CA Western $176,031,207 453 $677,694,098 $14,515,020 $2,131,795,187 103 CA Firefighters First $175,451,970 478 $598,807,531 $27,205,587 $1,051,710,352 104 MA Metro $169,922,600 519 $481,840,214 $110,112,384 $1,462,891,922 105 MD Tower $169,205,819 670 $422,842,905 $118,649,493 $2,755,247,048 106 CA San Francisco Fire $167,494,710 360 $436,491,279 $54,739,800 $1,084,921,264 107 OK Truity $165,430,370 817 $190,342,483 $112,428,920 $719,024,895 108 IN Elements Financial $165,218,782 841 $393,457,860 $63,803,402 $1,115,540,776 109 NM Nusenda $163,545,391 656 $450,347,205 $61,001,845 $1,650,711,698 110 WA Spokane Teachers $163,209,097 882 $873,789,636 $9,968,415 $2,142,130,691 111 CA KeyPoint $162,651,689 225 $434,285,940 $71,499,658 $1,024,241,286 112 OR Unitus Community $159,610,742 819 $233,289,890 $100,259,620 $971,815,318 113 WI Educators $159,034,069 1,346 $695,273,878 $8,312,044 $1,563,306,568 114 CA Evangelical Christian $158,926,545 47 $556,119,428 $214,695,406 $908,071,838 115 SC South Carolina $157,107,802 755 $448,295,565 $29,417,356 $1,387,679,280 116 IA Dupaco Community $157,037,873 1,193 $296,973,563 $98,343,635 $1,291,810,403 117 MI United $156,657,347 855 $778,795,878 $44,285,631 $1,985,015,439 118 NY Nassau Educators $155,232,305 396 $620,982,143 $49,295,261 $2,318,501,279 119 WI Covantage $154,324,047 1,230 $563,693,556 $26,438,105 $1,224,295,328 120 MO First Community $152,245,760 1,013 $387,750,364 $57,040,897 $2,084,825,141 121 MA Jeanne D’Arc $148,538,527 440 $662,339,988 $92,322,470 $1,154,623,657 122 CA American First $148,177,822 371 $207,001,962 $46,729,444 $545,964,418 123 FL Space Coast $148,085,291 790 $804,134,318 $47,790,809 $3,471,288,664 124 IA Collins Community $145,616,467 966 $350,668,555 $70,333,884 $873,126,871 125 WI Westconsin $143,910,453 1,119 $378,169,889 $114,384,098 $978,216,341 126 IN Evansville Teachers $141,399,568 1,165 $345,168,228 $61,559,502 $1,157,867,141 127 CO Westerra $140,608,100 453 $363,645,144 $107,759,333 $1,325,979,885 128 ND Town and Country $139,967,314 710 $145,572,627 $108,510,833 $372,519,479 129 IL Great Lakes $139,465,053 367 $181,329,700 $48,000,763 $690,325,995 130 MN Central Minnesota $139,400,904 844 $363,129,552 $62,624,375 $894,618,418 131 TX GECU $138,207,356 1,352 $420,323,008 $80,640,443 $2,218,659,894 132 CA Xceed Financial $137,793,663 383 $357,559,173 $105,871,953 $907,948,671 133 WI Marine $137,718,481 1,462 $239,214,641 $71,171,656 $578,942,030 134 CT American Eagle Financial $133,728,565 627 $463,141,721 $54,803,799 $1,398,772,223 135 WI Capital $132,841,005 1,062 $477,987,766 $26,278,712 $1,129,868,518 136 TN ORNL $132,295,336 872 $506,796,189 $54,024,600 $1,690,879,530

50 PIPELINE - January 2016 LongLong LiveLive AA GreatGreat Partnership. Partnership. AsAs a a proven proven industry industry leader leader operating operating multiple multiple lines lines of of business business and and strengthened strengthened by by$31 $31 billion billion in in assets,assets, BOK BOK Financial Financial delivers delivers the the one one thing thing all all customers customers seek: seek: confidence confidence in intheir their financial financial partner. partner.

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$ Originated # Originated $ Outstanding Name of 1st Mortgages 1st Mortgages 1st Mortgages $ Sold Rank Credit Union (Fixed & Adjustable) (Fixed & Adjustable) (Fixed & Adjustable) 1st Mortgages Total Assets 137 IN Indiana Members $132,021,960 731 $443,791,756 $23,808,380 $1,530,156,507 138 PA TruMark Financial $131,879,485 527 $504,347,684 $78,040,224 $1,648,657,309 139 WI Fox Communities $130,540,576 1,169 $671,750,028 $14,180,418 $1,109,953,680 140 NH St. Mary’s Bank $129,789,625 672 $286,326,613 $78,355,867 $880,130,075 141 CA Orange County’s $129,055,741 449 $501,337,664 $138,940,579 $1,299,593,696 142 CO Public Service $128,842,475 462 $184,498,065 $71,046,344 $1,590,254,998 143 IN Beacon $128,545,116 415 $630,044,049 $0 $1,152,736,455 144 CA Meriwest $127,588,344 175 $393,824,311 $100,290,425 $1,156,962,470 145 PA American Heritage $126,102,104 485 $414,859,578 $108,609,785 $1,551,295,374 146 PA Police And Fire $125,415,224 838 $1,352,109,656 $80,093,349 $4,310,966,429 147 WA Numerica $125,003,061 684 $392,857,838 $75,612,565 $1,538,255,996 148 NY Sunmark $123,437,601 634 $169,569,670 $65,050,472 $473,499,188 149 TX Navy Army Community $119,764,763 979 $823,082,340 $0 $2,317,461,581 150 WA Columbia $118,548,256 539 $350,029,965 $45,859,240 $1,102,954,503 151 NJ Polish & Slavic $117,322,027 465 $765,737,221 $0 $1,647,154,318 152 CA North Island $116,330,849 215 $445,939,483 $21,695,900 $1,179,670,545 153 MO Anheuser-Busch Employees $116,250,252 608 $400,305,798 $52,716,798 $1,532,674,955 154 CT Charter Oak $115,957,697 654 $522,811,390 $21,938,079 $913,974,132 155 MI Community Financial $114,608,451 601 $273,505,012 $60,264,053 $665,428,195 156 SC Founders $114,437,567 2,246 $658,596,806 $0 $1,823,270,393 157 VT Vermont State Employees $114,258,927 707 $312,347,083 $42,171,177 $680,887,408 158 IL Deere Employees $113,831,419 664 $358,888,748 $33,871,000 $715,519,425 159 MT Whitefish $112,654,695 599 $578,086,508 $0 $1,291,111,995 160 AL Redstone $112,469,605 856 $336,562,844 $95,918,954 $3,880,963,577 161 CO Credit Union Of Colorado $111,264,886 625 $274,152,456 $43,644,339 $1,269,088,048 162 NC Truliant $110,372,434 715 $465,339,258 $35,510,734 $1,849,724,902 163 CA USE $110,004,476 381 $264,683,402 $62,000,328 $816,296,264 164 WA Gesa $109,682,971 576 $289,630,591 $46,074,816 $1,536,347,709 165 VA Langley $109,634,718 678 $335,274,716 $28,720,348 $2,063,050,357 166 MA Rockland $109,595,584 316 $404,465,524 $33,891,780 $1,413,779,125 167 FL Grow Financial $109,468,019 632 $502,271,463 $83,036,616 $2,118,761,423 168 UT Deseret First $108,744,473 513 $129,336,199 $72,937,037 $494,443,437 169 KY L & N $108,513,868 741 $440,354,769 $8,364,350 $959,917,819 170 IN 3Rivers $108,237,000 652 $241,841,746 $14,151,775 $787,731,860 171 NH Service $108,133,202 491 $532,207,257 $0 $2,742,900,347 172 AZ Vantage West $107,535,179 330 $330,711,999 $7,826,147 $1,532,863,591 173 NM Sandia Laboratory $106,046,053 367 $650,937,240 $8,631,224 $2,170,221,553 174 OH General Electric $104,567,990 467 $429,426,487 $3,781,200 $2,132,758,086 175 GA Georgia’s Own $104,404,539 528 $458,537,928 $21,430,096 $1,881,479,966 176 NY Self Reliance New York $103,780,750 189 $695,749,332 $0 $1,146,951,166 177 FL Campus USA $103,628,603 802 $376,099,913 $155,800 $1,363,511,497

52 PIPELINE - January 2016 THE TOP 300

$ Originated # Originated $ Outstanding Name of 1st Mortgages 1st Mortgages 1st Mortgages $ Sold Rank Credit Union (Fixed & Adjustable) (Fixed & Adjustable) (Fixed & Adjustable) 1st Mortgages Total Assets 178 OH Superior $103,264,467 962 $205,201,831 $83,220,900 $519,050,760 179 NY Corning $100,929,051 702 $274,025,859 $37,544,136 $1,136,295,878 180 PA Franklin Mint $100,742,077 418 $245,178,848 $57,779,089 $885,666,517 181 CA Bay $99,191,050 340 $155,794,034 $70,414,790 $732,701,827 182 NY Empower $98,736,411 825 $229,568,649 $73,287,775 $1,353,378,334 183 MA Harvard University Employees $98,477,572 284 $236,009,290 $32,073,240 $503,278,434 184 MA Workers’ $98,029,814 380 $525,250,657 $24,633,051 $1,270,465,410 185 TN Ascend $97,746,709 568 $544,194,567 $0 $1,789,338,947 186 UT University First $97,694,186 589 $120,400,256 $54,966,464 $755,712,334 187 NE Centris $97,674,641 674 $189,374,626 $55,424,091 $572,880,557 188 WA TwinStar $97,133,570 530 $132,547,205 $77,490,602 $1,007,291,782 189 GA Robins $96,688,800 636 $332,889,349 $25,322,098 $2,066,465,453 190 NY Quorum $96,299,608 272 $356,980,595 $45,405,427 $933,249,501 191 WA iQ $95,620,364 377 $154,301,121 $56,287,232 $798,615,213 192 TX Texans $94,619,449 584 $276,092,619 $16,150,333 $1,407,678,622 193 IN Centra $94,304,402 624 $337,055,241 $24,510,870 $1,272,026,514 194 IN Indiana University $94,269,706 501 $360,671,174 $18,942,133 $823,155,223 195 NV Silver State Schools $92,827,530 381 $326,974,703 $49,414,928 $660,663,962 196 MA Webster First $91,990,350 296 $494,649,437 $0 $821,381,715 197 GA Associated $91,957,583 620 $216,470,156 $33,922,975 $1,366,599,806 198 NY Melrose $91,400,370 99 $461,311,180 $0 $2,083,690,217 199 IN Interra $88,817,473 439 $302,518,737 $5,493,880 $759,621,370 200 WA Verity $88,514,179 396 $135,623,771 $58,210,474 $461,184,478 201 DC Congressional $88,241,545 261 $238,653,560 $31,858,534 $803,824,999 202 CA Ventura County $87,626,457 270 $173,747,090 $52,490,522 $719,193,227 203 VA Dupont Community $86,895,020 552 $460,308,486 $17,043,179 $988,323,596 204 CA First Entertainment $86,705,636 210 $366,187,475 $20,019,448 $1,221,119,376 205 SC Sharonview $86,365,098 537 $529,486,591 $499,700 $1,186,018,383 206 WA Sound $86,219,775 436 $214,202,576 $45,104,356 $1,208,153,655 207 FL Achieva $85,292,276 392 $209,203,182 $45,424,518 $1,195,238,908 208 HI Hawaii State $85,271,895 215 $215,909,272 $10,650,150 $1,385,637,053 209 NC Allegacy $84,597,099 590 $221,106,125 $53,120,874 $1,137,038,554 210 CA Educational Employees $83,911,759 530 $295,531,914 $0 $2,451,550,286 211 TN Orion $83,080,283 320 $168,980,878 $4,174,616 $574,607,441 212 OK TTCU The $83,046,757 555 $180,853,947 $46,861,453 $1,581,181,127 213 WA Salal $82,835,766 288 $129,241,202 $62,937,333 $417,688,026 214 WI Westby Co-op $82,618,761 707 $164,489,702 $22,270,755 $410,130,970 215 WI Verve, a $82,480,149 530 $383,329,693 $26,657,812 $727,397,381 216 TX First Community $82,242,681 373 $235,448,029 $6,566,893 $1,136,788,184 217 CA CoastHills $82,146,604 361 $371,207,601 $13,510,900 $879,237,791 218 IL Dupage $82,114,001 417 $15,137,930 $81,694,996 $300,622,362

January 2016 - PIPELINE 53 THE TOP 300

$ Originated # Originated $ Outstanding Name of 1st Mortgages 1st Mortgages 1st Mortgages $ Sold Rank Credit Union (Fixed & Adjustable) (Fixed & Adjustable) (Fixed & Adjustable) 1st Mortgages Total Assets 219 MI Lake Trust $81,423,593 494 $530,695,442 $0 $1,631,280,602 220 UT Cyprus $80,394,477 358 $144,411,318 $37,460,154 $713,232,798 221 MA Direct $80,241,310 221 $165,986,870 $30,392,863 $439,184,380 222 MA Hanscom $80,093,040 316 $213,933,466 $62,157,988 $1,099,579,588 223 OK Weokie $79,677,977 402 $298,609,226 $12,466,802 $1,014,107,956 224 CA Los Angeles Police $79,665,083 285 $268,193,000 $26,733,820 $841,552,893 225 FL MidFlorida $79,139,820 357 $637,894,949 $138,113,144 $2,322,242,236 226 MN Spire $78,809,265 466 $199,453,144 $48,469,768 $801,575,612 227 MA First Citizens’ $78,272,244 311 $240,576,235 $11,782,870 $664,041,080 228 IA Community Choice $77,092,192 486 $58,683,252 $60,936,114 $433,715,565 229 NY USAlliance $77,052,625 137 $290,191,465 $7,843,163 $1,076,988,188 230 NE Liberty First $76,944,924 519 $61,711,678 $67,756,380 $205,655,994 231 OR Oregon State $76,831,462 331 $196,292,575 $37,725,765 $962,439,907 232 TX United Heritage $76,728,359 407 $304,345,344 $20,627,358 $841,001,196 233 MA St. Anne’s Of Fall River $76,612,342 339 $423,374,888 $27,562,909 $861,219,856 234 AZ TruWest $76,591,565 366 $249,027,396 $50,692,652 $903,837,716 235 NY Municipal $76,568,812 289 $622,172,345 $0 $2,215,232,661 236 FL Power Financial $76,275,171 221 $289,876,743 $0 $533,269,446 237 CO Air Academy $75,747,428 347 $151,950,229 $52,946,653 $506,358,489 238 MD National Institutes of Health $75,745,668 277 $172,585,315 $51,122,632 $552,887,496 239 TX EECU $75,586,682 457 $219,642,773 $46,076,546 $1,777,146,709 240 MI Advia $75,467,710 410 $301,388,427 $2,471,300 $1,140,215,906 241 CA Kern Schools $75,194,990 396 $374,536,024 $5,106,443 $1,322,638,635 242 CA USC $75,003,800 192 $94,752,861 $43,168,900 $422,348,842 243 OR Rogue $74,610,905 455 $204,272,103 $51,717,010 $1,044,781,644 244 WA Solarity $73,994,010 408 $199,742,417 $34,059,682 $601,877,727 245 DC IDB-IIC $73,729,594 166 $309,087,828 $0 $506,965,041 246 VA State Department $73,642,088 231 $482,066,782 $63,570,569 $1,677,926,729 247 TX Austin Telco $72,965,719 388 $307,061,939 $6,072,927 $1,334,580,351 248 NC Self-Help $72,573,698 353 $353,796,374 $0 $605,983,507 249 FL Pen Air $72,443,402 378 $208,834,849 $6,039,140 $1,278,966,289 250 IL Abbott Laboratories Employees $72,403,707 317 $190,640,803 $31,903,850 $680,221,224 251 SD Sioux Falls $72,172,488 427 $14,446,994 $69,468,099 $232,480,112 252 ID Potlatch No 1 $72,080,094 485 $74,171,135 $64,825,308 $776,526,540 253 MI Dow Chemical Employees $71,428,306 474 $378,817,144 $6,371,490 $1,446,633,477 254 MN Hiway $71,300,100 420 $367,194,295 $11,254,708 $994,285,736 255 CA Credit Union of Southern California $70,352,049 192 $291,444,189 $11,166,598 $989,887,394 256 ND First Community $69,568,492 153 $217,857,314 $22,702,381 $540,096,607 257 TN Knoxville TVA Employees $69,284,031 738 $426,559,749 $9,151,040 $1,459,494,004 258 NY CFCU Community $69,048,050 431 $408,433,532 $8,863,418 $954,907,461 259 TX Shell $68,349,228 527 $163,003,858 $22,800,834 $738,431,975

54 PIPELINE - January 2016 THE TOP 300

$ Originated # Originated $ Outstanding Name of 1st Mortgages 1st Mortgages 1st Mortgages $ Sold Rank Credit Union (Fixed & Adjustable) (Fixed & Adjustable) (Fixed & Adjustable) 1st Mortgages Total Assets 260 OR First Community $68,307,705 456 $225,597,542 $32,475,783 $878,434,175 261 WA Global $67,640,265 376 $74,498,700 $38,007,950 $380,848,607 262 VT Vermont $67,459,703 701 $128,242,970 $44,304,709 $450,120,083 263 MA Align $67,368,789 251 $234,857,509 $23,204,825 $563,679,563 264 WI Thrivent $66,657,736 434 $182,734,340 $48,069,000 $467,407,268 265 MA Greylock $66,607,230 399 $457,383,189 $31,823,362 $1,073,551,303 266 CA Schools Financial $66,600,197 453 $178,567,081 $28,733,317 $1,590,991,120 267 CA San Francisco $66,390,202 159 $330,852,413 $0 $974,844,640 268 PA Philadelphia $66,355,117 256 $244,538,419 $18,397,763 $939,466,484 269 NY Island $65,515,350 243 $234,501,238 $10,711,100 $1,060,129,403 270 VA University of VA Community $65,477,453 595 $115,162,870 $38,519,666 $715,040,823 271 FL IBM Southeast Employees $65,435,354 380 $242,886,099 $19,167,954 $881,258,835 272 MI Michigan Schools and Government $64,942,534 439 $483,185,155 $160,000 $1,526,782,416 273 CA Point Loma $64,805,049 149 $209,666,136 $0 $443,453,776 274 SD Black Hills $64,563,556 342 $317,748,170 $10,349,970 $1,052,287,788 275 CO Colorado $64,506,591 263 $24,527,900 $60,879,254 $138,825,290 276 IL Scott $64,356,736 458 $102,096,198 $34,277,823 $1,017,001,898 277 TX Members Choice $64,119,813 165 $204,044,033 $4,045,180 $494,214,292 278 TX Texas Tech $63,867,849 322 $20,388,570 $47,357,541 $112,106,809 279 AL APCO Employees $63,831,628 386 $430,843,570 $0 $2,583,141,459 280 WA Inspirus $63,308,111 408 $156,613,354 $0 $1,049,326,586 281 WI Kohler $63,294,962 510 $107,560,920 $40,961,753 $299,291,704 282 CA Southland $63,179,450 202 $152,804,376 $44,307,850 $578,568,194 283 WI Blackhawk Community $62,952,096 445 $137,993,560 $47,409,269 $416,026,537 284 OH KEMBA Financial $62,610,606 465 $259,887,790 $20,292,649 $980,629,386 285 TX Firstmark $62,319,348 529 $335,929,309 $0 $980,561,652 286 AL America’s First $62,252,246 533 $365,157,899 $12,405,716 $1,368,817,844 287 SC SRP $62,180,824 509 $80,288,470 $48,763,930 $713,896,824 288 MI Honor $61,782,228 488 $207,542,675 $34,331,557 $643,739,766 289 CA SF Police $61,715,112 147 $304,835,004 $15,233,094 $797,063,138 290 OR Rivermark Community $61,161,827 323 $164,033,070 $33,701,760 $694,693,972 291 AK Matanuska Valley $60,367,308 279 $159,670,162 $4,593,992 $441,446,452 292 OH Directions $60,185,977 401 $216,254,086 $49,220,066 $621,093,793 293 AL MAX $59,822,285 311 $200,108,037 $18,066,500 $1,139,440,592 294 FL Tropical Financial $59,621,391 267 $187,555,149 $49,371,775 $575,498,637 295 NY AmeriCU $59,508,215 435 $262,580,524 $35,710,509 $1,267,343,597 296 OH Seven Seventeen $59,186,180 433 $313,934,157 $12,207,225 $844,541,634 297 VA BayPort $58,887,930 276 $401,315,583 $13,748,257 $1,409,254,778 298 FL Community FirstCU of Florida $58,694,243 382 $372,649,281 $15,676,279 $1,307,591,226 299 TX A+ $58,681,255 402 $213,273,712 $10,404,680 $1,188,827,593 300 CA LBS Financial $58,575,308 194 $231,126,180 $18,830,805 $1,190,429,127

January 2016 - PIPELINE 55 TRAINING AND DEVELOPMENT

The Last Word A Look at Big-Picture Issues Facing Credit Unions By Tracy Ashfield

feel so grateful to be able to spend my days in credit unions and CUSOs across the country. I have had the Igood fortune to work with so many of leaders in our industry, and I have met—and worked with—the best and the Does it really take brightest that credit union mortgage lending has to offer. processing for five years or more to be Over the last year I have seen so recollection also highlights one of my many originators, processors, under- greatest worries. an underwriter? writers and closers work days—and We have been blessed with amaz- sometimes nights—to help members ing technology solutions and vendor get into homes. I marvel at the depth partners that help us avoid missteps of expertise these people have. I see in- and risks that make our jobs easier. On novative problem-solving and a consis- this front there have been so many ad- Are we ready to build training and tent “can do” attitude at work in every vancements it makes my head spin. development programs that resonant corner of the real estate department. But something hasn’t changed— and entice younger workers? Can we It is with simpatico for these people something very important. Training lose the attitude that “competency that I remember with great fondness and Development. comes only with time”? my years working in each of those four Thirty years later I am watching We have twenty-somethings run- key positions. origination and fulfillment staff being ning billion-dollar companies. Do we Do you know what else I see? I see trained the same way I was. really believe that they can’t be taught a lot of me. And by that I mean I see “Watch me, then try it, bring it to to underwrite a loan? Do we thrive on workers in their “second half” of life— me for correction, and watch me some keeping workers moving from job to past 50 years of age. more.” job so they can see the big picture? Or Many of them can remember when “Keep doing that for years and are we happiest when someone learns our “tools” consisted of a 10-key calcula- years, and you’ll be ready to advance.” their “piece” and wants to keep doing it tor with a tape and an IBM Selectric Guess what? It wasn’t really appeal- for years to come? Typewriter. Yes, APRs were done by ing or efficient then, and it sure isn’t go- It’s time to value “young, innova- hand, and Closing Statements had car- ing to attract millennials into our real tive, enthused and eager” over “older bon paper! estate departments. and wiser.” Let’s leave “older and wiser” Those who might not have started to the owls. quite that long ago still have memories of Texas Instruments BA II or HP12C TIME TO CHANGE Tracy Ashfield is president of calculators and fighting with the fax Like so many of my peers, I am Ashfield & Associates, a consulting and machine, trying to get last-minute proud of my journey up the ladder. I training business that assists credit changes to a closing agent. Oh, those am the last one that wants to diminish unions with mortgage lending strategy, were the days! that journey, but, as the leaders of this development, policies, product design wonderful crazy business, WE HAVE and strategic planning. She also works TO GET OVER IT! with NCUA to provide training and edu- THE MORE THINGS CHANGE … Does it really take processing for cation on residential mortgage lending And while a bit of nostalgia can five years or more to be an underwrit- for examiners and regulators. bring a smile to my face, this particular er? NO!

56 PIPELINE - January 2016 Always a step ahead. How do you deliver a mortgage program that keeps you ahead of the competition?

STEP 1: Offer the widest range of STEP 2: Choose a mortgage STEP 3: Work with CU Members loan options to capture every type program that’s built to match your Mortgage, a leader in mortgage of home buyer, with award winning resources and objectives. Never origination and servicing for more service to retain your members for settle for one size fits all. than 30 years. years to come.

At CU Members, we’ve rebuilt our business model to boost your mortgage program with innovative new options that benefit your bottom line. It’s unlike anything in the industry, and all it takes is one conversation to see how we’ve stepped up our game. Want to learn more? Give us a call.

Listening. Lending. Leadership.

800.607.3474 ext.3225 [email protected] www.cumembers.com

CU Members Mortgage is a division of Colonial Savings, F.A. NMLS #401285 8.5x11_wBleed_AMC_Ad.pdf 1 5/8/14 1:14 PM