NEW YORK—One $73-million credit union that consistently boasts ROAA above 3% and eye-opening membership growth is emphasizing what a handful of other successful undersized cooperatives have also told CUToday.info—an organization needs a niche to succeed.
And New York University Federal Credit Union here is doing that well. It’s specialty is a First-Time Homebuyer program and a mortgage preparedness loan that not only generates significant revenue—including non-interest income—but strong word-of-mouth that drives membership growth above 30% in some years.
Those credentials have taken the credit union from $26 million in assets in 2019 to where it stands today, approaching $100 million. Capital is 14.99% and net income last year was $2.7 million, according to Call Report data.
“This first-time homebuyer program is very unique and it gets a lot of attention,” said CEO Mira Ness. “It’s our niche.”
Counselors Hired
Several years ago NYUFCU hired two homeownership counselors and created a program where it starts counseling members three-to-five years in advance of applying for a home loan to help them afford and obtain a mortgage.
“To achieve that we implemented a Mortgage Preparedness Loan, a $50,000 unsecured bill consolidation loan, where our members consolidate their outstanding debt and have only one affordable payment. In addition, they would get a lot lower interest rate than what they are currently paying,” Ness explained. “We also help the member create a budget and start saving for a downpayment. As soon as they save 10% for a downpayment, we provide a 10% downpayment assistance loan, so they can have 20% down and avoid paying a PMI on the mortgage.
Reaching Out to Other CUs
Mira Ness
Ness noted that NYUFCU regularly offers a free financial seminar that’s always well attended. But at those seminars, which include homebuying topics, people often tell the credit union they are seeking to buy homes in neighboring New Jersey and Connecticut and other states, markets the credit union did not serve.
“We are a small credit union and we had only offered mortgages for homes within five counties of New York (City) and some that border New York. But I started hearing more members saying they are buying a home in Florida, they're buying in California. Obviously, we cannot offer mortgages in every state as each has their own regulatory requirements,” said Ness, adding the CU has since extended its reach to a larger number of states.
The credit union conducts about 25 seminars per year and Ness said the classes have been generating a great deal of mortgage business.
That led Ness to talk with several of the larger credit unions that operate in the New York City market.
“I asked them if they wanted to partner up, because our small credit union cannot keep all those mortgages. I told them I’d sell some to them,” she explained.
The CU also sells to the secondary market.
“Last year, for example, we earned $784,000 in non-member income from it,” Ness said, referring to the servicing.
The credit union says on its website it now offers mortgages in all 50 states.
Getting Financially Fit
Ness emphasized the first-time homebuyer program is aimed at getting members financially fit to purchase a home and take on a mortgage.
“A lot of people have outstanding debt—credit card debt or student loan debt—so, that is why we created the Mortgage Preparedness Loan that basically a bill consolidation loan. It’s unsecured and it’s high risk. We put their outstanding debt into one loan so they can focus on one payment with one rate—not some crazy 20%-plus interest rate on several cards.”
The credit union also works with members to save for a downpayment.
“We call this the Dream Account, where they save money for their dream,” Ness said.
Ness said not every member who takes out a mortgage preparedness loan stays with the credit union to take a home loan at the end.
Low Delinquencies
“But I will say this, with the loans we have made there is very little delinquency and the program sells itself through word of mouth,” she said.
The program has been successful at driving strong mortgage business each year, and it is growing, Ness said.
“The first year we did about $15 million in mortgage business and last year we did $35 million. We sold $25 million of it,” Ness said. “And, as I said, we made $784,000 in non-member income from it—we do mortgage servicing of mortgages that do not belong to us.”
In 2022, the credit union booked 52 mortgage preparedness loans.
“Our field of membership is one-third New York University employees, students and alumni,” said Ness. “Even though New York University is one company, it's a huge organization that consists of 17 schools and six hospitals.”
High Membership Growth
Outside of the mortgage business success, the credit union over the years has seen high membership growth, including more than 30% in 2019 and 23% in 2020. Ness said it’s largely due to word-of-mouth advertising.
NYUFCU has approximately 9,300 members.
“When we open new accounts we have a mandatory survey question: How did you hear about us? You can’t skip the question, you have to answer it,” Ness explained. “Ninety-nine percent of the time people say I heard about the credit union from my coworker, a friend or family member. Each month we are opening at least 100 new accounts. Last month we welcomed 126 new members—95 of them said I heard from my from my department or from another member, and 22 said they learned of us through Facebook, and some heard about us through the college alumni magazine.”