Planning…

…(Definition, system for achieving objective; a method of doing something that is worked out in advance)… Along with Pro Football, Halloween and Thanksgiving, it’s that time again!

I think back over the years to the evolution of “planning” in many Credit Unions. Back in the day, it used to be focused on “The Budget” for the coming year. It was interesting to achieve the desired mathematical outcome and a bit less in the actual details…Well that was then and this is now!

Of course, my primary focus is Housing and Home Loans. You may define these transactions as something else but there appears to be a storm on the horizon. Many of our successful credit unions are quite active in the Home Loan business. We have had some great years of late with more than historic home loan interest rates and some time to adjust to the impending implementation of Dodd-Frank regulations.

I read two headlines just today which were a bit startling. One was Bank of America, JP Morgan Chase and Wells Fargo all laying off staff. In B of A’s case they announced more than 1,000 jobs would be cut. Yes some are in Loan Servicing but in most cases it is the sign of lower production and fewer offices and loan originators. The other headline was in line with this stating, “If you are a Refi-shop, you will be going down hard” referring to the decrease in mortgage revenues we have grown accustomed to.

I always view planning issues from the position of, so what are we (or in this case you) going to do?  January 14, 2014 will find your News Celebration a fading memory but also on that day “most of the final regulations proposed by the CFPB, including QM and QRM will take effect on this date”.

I can tell you most of the interaction with our members these past six months have centered on these regulations and the burden it may place on your credit union’s ability to continue your robust mortgage lending strategy. Now if that disturbs you may add to this the fact that mortgage interest rates have risen about 100bps in the past few months and a reminder that approximately 40% of all real estate transactions this year have been “all-cash deals” meaning no loan opportunity for anyone! Whether you believe you compete with Wells Fargo or not, they have a 27% market share in Home Loans, more than four times the market share of ALL credit unions.

Now, with this picture in mind, what are you to do. My suggestions are as follows…Everyone in Senior Management must be aware of the impact these events will have on the credit union. We have long since proven that mortgage lending holds the proverbial key to your member relationship, (no pun intended)!

Once you have a consensus that everyone realizes the stakes are high we can get to work. In my mind I first have to know what kind of talent I currently possess in my organization to achieve the objective. In some ways your competitors laying off thousands of people highly skilled in this business may benefit your organization. However the other part of this exercise is to determine your marketing strategy. There will be fewer loan applications and hence fewer loans. Many, even most will arrive from outside of your control or influence. You will also be interacting with more third-parties, in addition to your member. Realtors, Builders and in some cases dare I suggest it, Investors will be recognized as sources for loans. I am not necessarily suggesting how to develop loan products and policies but merely saying these are the transactions for which competition will be fierce. I’m not sure I can remember a year in recent decades where the stakes were this high.

I am ever the optimist. I see Credit Unions taking a stand in communities they serve. Attract awareness as an alternative for traditional Housing Finance, building and sustaining a vibrant Home Loan market presence when and where members, existing and prospective need them. I am so tired of that old phrase “the best kept secret” referring to credit union mortgage lending. Maybe we can take a lesson from the creator of Mercedes Benz, “The Best or Nothing” You have the power to make it right, we’re counting on you!