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ACUMA FALL LEADERSHIP CONFERENCE. ROUNDTABLE SOLUTIONS – RESULTS AND CONCLUSIONS. October 8, 2004 Caesar’s Palace Las Vegas, Nevada. CUSO MORTGAGE LENDING. ADVANTAGES Serving Nonmembers CUSO as an indirect lender More product lines Compensation Staff and Executives

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acuma fall leadership conference

ACUMA FALL LEADERSHIP CONFERENCE

ROUNDTABLE SOLUTIONS – RESULTS AND CONCLUSIONS

October 8, 2004

Caesar’s Palace

Las Vegas, Nevada

cuso mortgage lending
CUSO MORTGAGE LENDING
  • ADVANTAGES
    • Serving Nonmembers
    • CUSO as an indirect lender
    • More product lines
    • Compensation
      • Staff and Executives
    • Staffing Flexibility
    • Enable more CUs to offer mortgage products
cuso mortgage lending1
CUSO MORTGAGE LENDING
  • ADVANTAGES (cont)
    • Approaching CUs not in the business
    • Reverse Participation (A new term invented by this group) (Def - Obtaining a commitment for the participation of loans on a forward basis)
cuso mortgage lending2
CUSO MORTGAGE LENDING
  • CUSO Organizations designed for Real Estate Lending
    • 13 CUs purchased an existing operation
    • 6 CUs formed a single CUSO
    • 1 formed a wholly-owned CUSO
    • Purchasing an existing mortgage business
cuso mortgage lending3
CUSO MORTGAGE LENDING
  • CUSO Organizations designed for Real Estate Lending
    • Transfer CU employees to a CUSO to begin operations
    • 2 Large CUs forming a single CUSO for economies of scale
    • Develop a Construction Lending CUSO to focus on a single loan product
cuso mortgage lending4
CUSO MORTGAGE LENDING
  • Best Practices approaching correspondent CUs
    • Gets the CU in the mortgage business
    • Lead with Loan Servicing
    • Offer marketing support/advice
    • Cross selling their products at loan closing
    • Keep members from competition
cuso mortgage lending5
CUSO MORTGAGE LENDING
  • Objections from CUs joining a CUSO
    • They just don’t get it!
      • CEOs and volunteer
    • CEO not willing to take responsibility for expanding products for their members
    • Existing relationships
cuso mortgage lending6
CUSO MORTGAGE LENDING
  • Objections from CUs joining a CUSO (cont)
    • Staff and management conflict
    • Job security (CU employees concerned about outsourcing)
    • CUSO will not provide the same level of service as the correspondent CU
cuso mortgage lending7
CUSO MORTGAGE LENDING
  • Ancillary products and services that may be offered by a CUSO
    • Real Estate Brokerage
    • Title Insurance and Settlement Services
    • Consumer loans
    • P/C Property & Casualty Insurance (Be careful)
    • Home warranties
cuso mortgage lending8
CUSO MORTGAGE LENDING
  • Ancillary products and services that may be offered by a CUSO
    • Life Insurance
    • Financial Services (Securities cross sell)
    • Reverse Mortgages
    • Fee Services (training, outsourced processing etc)
emerging markets
EMERGING MARKETS
  • WHAT TO LOOK FOR & BEST PRACTICES
    • CUs as “out of the box thinkers”
    • Financial Partners and their billboards in Spanish. Take advantage of ethnic diversity
    • Aging members and reverse mortgages
    • Land trust activities in CO.
emerging markets1
EMERGING MARKETS
  • WHAT TO LOOK FOR & BEST PRACTICES
    • Affordable lending in Texas diverse markets (customizing GSE programs)
    • Nonconforming loans criteria in Nevada to conforming loans
emerging markets2
EMERGING MARKETS
  • WHAT TO LOOK FOR & BEST PRACTICES
    • Teaching auditors and examiners to understand nonconforming loans
    • Partnering with Realtors
    • Look to the CU’s roots of CU service mentality
    • Get the word out CUs make mortgage loans
emerging markets3
EMERGING MARKETS
  • WHAT TO LOOK FOR & BEST PRACTICES
    • Don’t reinvent the wheel
    • Talk with suppliers
    • Address unique member recordkeeping (documentation) and work to help them
    • Investigate how to help and educate members improve their loan quality
emerging markets4
EMERGING MARKETS
  • WHAT TO LOOK FOR & BEST PRACTICES
    • Check out www.Payrentbuildcredit.com
    • Learn what others (the competition) is doing
cross selling strategies
CROSS-SELLING STRATEGIES
  • The “1003” has a great deal of information – Use it!
  • Staff needs to know the full scope of CU’s products
  • Look to sell relationships
  • Training is needed and necessary
  • Develop strategies for cross selling specific products
cross selling strategies1
CROSS-SELLING STRATEGIES
  • Monitor results from all activities
  • Don’t make the process harder than it has to be. Use of a single app?
  • Listen to what the members want. Improve listening skills
  • Evaluate audit skills. (Noted in incentive programs)
  • Incentives are helpful to achieve cross selling objectives
  • How effective is the tracking?
cross selling strategies2
CROSS-SELLING STRATEGIES
  • Specific department chartered to take the “1003” and begin the cross-selling process
  • Look for opportunities and efficiencies in approving credit
  • Make sure policies and strategies are in sync
alm issues
ALM ISSUES
  • Is this the time to retain or sell loans?
  • Make sure you clearly assess the opportunities versus your objectives
  • Make sure your board policies and ALM polices are in sync
  • Securitization strategies? When they are helpful and why?
  • Hedging strategies – Pipeline management
alm issues1
ALM ISSUES
  • Investigate alternatives for hedging with other investors including secondary marketing entities and CUs through loan participations
  • What do you do with the funds you receive from loan sales?
  • Need more communication on lending and hedging strategies.
alm issues2
ALM ISSUES
  • CU culture is still a bit of a disadvantage both inside CU industry and the market in general.
  • Is mortgage lending “CORE” to the CU’s business model?
    • If not, why not?
  • Priority level of mortgage lending needs to be raised in the CU community.
alm issues3
ALM ISSUES
  • Should the mortgage lending executive sit on the ALCO committee (75% - Yes) (Slight bias noted)
compensation strategies for results
COMPENSATION STRATEGIES FOR RESULTS
  • Most popular group. Highest level of interest.
  • Comp is all over the map
  • Base Only –
    • Pro – Job security for CU employees
    • NEG – Lack of motivation
compensation strategies for results1
COMPENSATION STRATEGIES FOR RESULTS
  • Base plus commission – Small base with commission $$ per units in excess of achieved goal
    • PRO – Additional incentive
    • CON – Only select people can earn incentives vs others
    • Sales people can make more money that senior CU staff
compensation strategies for results2
COMPENSATION STRATEGIES FOR RESULTS
  • All Commission –
    • PRO – Motivation driven
    • CON – Works well in good markets not so well in soft markets
  • Cross sales and incentives –
  • Most were paying for cross sales using the 1003
compensation strategies for results3
COMPENSATION STRATEGIES FOR RESULTS
  • Cross sell other CU financial products
  • Cross sell incentive on insurance products were about $50
  • Originators pay processors to increase productivity
compensation strategies for results4
COMPENSATION STRATEGIES FOR RESULTS
  • Paying overages –
    • PRO - Paying an originator on excess yield
    • NEG – Taking advantage of members perhaps instead of giving them a lower rate
  • Increasing source of business
  • Advertising, communication, and direct mail
compensation strategies for results5
COMPENSATION STRATEGIES FOR RESULTS
  • Product Profitability – The mortgage is one of the most profitable products the CU offers
  • Employee retention
  • Career path for staff to work their way into higher paying positions
compensation strategies for results6
COMPENSATION STRATEGIES FOR RESULTS
  • Use the better working conditions at the CU to attract qualified staff.
  • Are you aggressive enough on compensation strategies?