Partnering with community organizations and agencies can enable credit unions to tailor loans to their members and address challenges unique to their communities, lenders say.
“If we’re not serving members’ needs, we won’t be successful,” says Carlos Miramontez, senior vice president of mortgage lending at $2.4 billion asset Orange County’s Credit Union in Santa Ana, Calif. “My advice for credit unions is to identify the membership they’re serving: What are their needs? How are their needs different than the average population in your community? Make sure you have the products and services that match those needs.”
Orange County’s has found success and addressed a key community need with a mortgage program that expands access to affordable housing.
The lack of affordable housing has led to a homeownership crisis in California, which is short about 3 million housing units, according to Miramontez. To erase that deficit and account for population growth, every municipality is required to come up with a housing plan.
The housing deficit gave city officials the same vested interest as Orange County’s, where 80% of members are low- and moderate-income borrowers.
“It’s great when external partners have an aligned mission,” Miramontez says. “It’s an ecosystem. We all have to work together to make a dent in the housing shortage.
“Helping members purchase their first home enhances their financial lives,” he continues. “We’re looking to expand homeownership as much as we possibly can.”
Toward that aim, the credit union prioritizes finding new affordable housing options, leading to insights about community land trusts. These nonprofit, community-based organizations exist to ensure community stewardship of land.
‘It’s about learning who we serve and what their needs are, then trying to fill any gaps we have with our products.’
Carlos Miramontez
The trusts are limited to lower-income people, and there are limits on how much home prices can rise, Miramontez explains.
“It’s tied to the area’s median income as opposed to housing prices,” he says. “That’s how the community land trust keeps homes affordable at the onset. Buyers get a big discount on the sale price, but they also have limitations on how they can sell those homes in the future.”
A community land trust began building affordable, multifamily homes in Southern California in 2021. The condominiums, valued between $750,000 and $850,000, sold for $450,000 to $550,000 due to a subsidy the land trust provided.
All 68 homes were sold to preapproved individuals, who were required to be first-time homebuyers, earn no more than 120% of the area’s median income, and undergo homeownership education from NeighborWorks Orange County.
The credit union used its community connections to become one of three preferred lenders for the first-time homebuyer project, joining a large national lender and a community bank.
The initial goal was to finance 50% of the project. But Orange County’s financed 70% of the project’s first phase, which started in January 2022, and 80% of phase two, which started in May 2022.
“That was a behemoth goal. We did much better than we ever dreamed,” Miramontez says, noting that Orange County’s service-centric approach stood out. “We set up a hotline so those calls would go to mortgage loan consultants familiar with the product. It went so well that the agents started referring consumers to our credit union.”
While financing finished in June 2022, Orange County’s has maintained a relationship with the community land trust, which is establishing another affordable housing development.
The credit union also offers low (3%) and no down payment mortgages. This improves affordability and provides an opportunity to consult members.
“It creates interest,” Miramontez says. “People say, ‘Oh, I can buy a home with no money down? Let me call the credit union and find out more.’ After we go over their options, many decide to have some down payment. We identify the best financial structure for them based on what they’re looking to purchase, when they’re ready to purchase, and what assets they can use for a down payment.”
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