Over the years, Charter Oak Federal Credit Union’s experience with indirect lending was less than ideal—it contributed to loan losses and rarely produced worthwhile member relationships for the Groton, Conn.-based institution.
So in late 2009, the $687 million asset credit union exited this line of business to focus more heavily on mortgage lending and attracting new members with cross-sale potential.
Enter Charter Oak Federal’s “accelerated mortgage,” which allows homeowners to refinance to an eight- or 12-year term at a low, fixed rate.
Roughly 90% of the more than 500 homeowners who refinanced through the program in 2010 were new members with an average loan-to-value of 45% and credit scores in the high 700s, says John Dolan, senior vice president/chief lending officer.
Accelerated Mortgages now account for one-third of the credit union’s mortgage portfolio. “Having eight- and 12-year products instead of 30-year mortgages in our portfolio is a great deal,” Dolan says. “Plus, these members all have stellar credit scores. So it was a total home run.”
Charter Oak Federal also made other changes in 2010:
* Moved all mortgage processing and underwriting in-house;
* Implemented software from Mortgagebot [mortgagebot.com] to introduce online mortgage applications and streamline processing and servicing;
* Reorganized the lending department, transferring six employees from other departments to the loan department to handle higher volume;
* Expanded member business lending;
* Added software from CU Direct Corp.’s CUDL program to offer online auto loan applications and process applications; and
* Worked with the marketing department to use radio, newspaper, and transit system advertising to promote mortgages and other loans.
Dolan says this lending overhaul had a “ripple effect” that continually required additional changes. For example, the credit union redesigned its website to accommodate online applications and offer new products.
“It was a challenging time that required the staff to work really hard,” Dolan says.
The result was a strong team knit together by shared accomplishments, including total lending of $177 million in 2010—a 35% increase over the previous year’s $131 million.
Charter Oak Federal made 1,172 mortgages, maintained a 95% member satisfaction rating, and became the top aggregate mortgage lender in its region.
It expects to maintain that top ranking by completing more than 750 mortgages in 2011.
A U.S. District judge Monday dismissed three lawsuits--including one by the National Credit Union Administration--brought against U.S. Bank National Association and Bank of America, National Association regarding their duties as trustees of residential mortgage-backed securities.