CU Hits a Mortgage Home Run

‘Accelerated mortgage’ proves popular among well-qualified borrowers.

March 1, 2012

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 [] 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.

Subscribe to Credit Union MagazineDolan 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.

For its efforts, Charter Oak Federal received an Excellence in Lending Award from the CUNA Lending Council and CUNA Mutual Group.