By Brad Meader
In a world of shop-around financing and shrinking loyalty, credit unions are faced with finding new ways to engage and retain members. High-balance members in particular place a premium on service. If they don’t receive the level of service they’re looking for, they aren’t afraid to move or divide their accounts to the places that can offer a more rewarding relationship.
These members offer a lucrative opportunity for financial institutions to deepen relationships, but their needs can sometimes exceed a local lender’s capabilities. CD rate bonuses and wealth management services may appeal to some, but are you ready when those same clients come to you to finance a million-dollar home?
According to Guy Cecala, CEO and publisher of Inside Mortgage Finance, jumbo loans made up 19% of all mortgage business in 2015 – an all-time high. That equated to an estimated $320 billion in jumbo mortgage financing for the year. Can these non-conforming loans be the difference between retaining a high-balance member and losing out on a potential lifetime relationship? That’s the $417,001-plus question.
Credit unions can better compete for a piece of the jumbo pie with the MPF Direct product, available to members of the Federal Home Loan Banks of Atlanta, Boston, Chicago, Des Moines, Pittsburgh and San Francisco. MPF Direct enables you to fulfill jumbo non-conforming home loan requests up to $2.5 million.
FHLBanks allow Participating Financial Institutions (PFIs) to make jumbo loans with confidence, and sell the loan through MPF Direct to minimize the internal risks, such as long-term interest rate risk.
Now’s the time to “C’s” the opportunity
It’s a critical time for local lenders. Jumbo loans allow you to carve out a niche in a segment teeming with potential: high-balance members. Here are the 5 Cs of how you can use MPF Direct to easily manage a non-conforming loan program, allowing you to focus on member satisfaction.
- Capitalize: Jumbo loans account for nearly 20% of the mortgage market, MPF Direct allows you to take advantage of a growing segment of borrowers. With such high home prices, jumbo loan requests are becoming more commonplace.
- Compete: Compete for non-conforming business, without a minimum jumbo volume requirement, while offering your personalized level of service. You use your own familiar faces and pre-existing relationships to your advantage.
- Confidence: The MPF Program has partnered with Redwood Trust, the MPF Direct investor, to make jumbo financing available to our PFIs. Redwood Trust a well-established REIT in the jumbo mortgage market and a member of the Federal Home Loan Bank of Chicago is a steady, proven outlet for purchasing non-conforming loans. With the strength of this secondary market partner, there’s no need to hold onto sizable loans at a fixed rate for a long period of time.
- Control: You are able to maintain your member relationship, without the worry of other investors who could potentially market to your members.
- Cross-sell: Members with jumbo loans can often represent larger opportunities due to the nature of their financial needs—needs that you can fulfill. High-balance members tend to be more frequent applicants for home equity line of credit (HELOC). They are more likely to return when it’s time to remodel.
Contact your FHLBank, to identify new lending opportunities and facilitate your application to utilize the MPF Direct product.
Brad Meader is AVP/Manager-Mortgage Products Group with the FHLBank of Des Moines.