ACUMA January 2015 Pipeline by ACUMA

ACUMA

PIPELINE

January • 2015

MAGAZINE

U.S. Macro Outlook 2015:

Spirits Unleashed By Mark Zandi n Page 30

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Table of contents

CU Mortgage Lending, A real alternative for members

In the Pipeline: Insights and Observations on CU Mortgage Lending

By Bob Dorsa

Mortgage Insurers Start the New Year with New Master Policies By Arch Mortgage Insurance Company

ACUMA 2015 Annual Conference September 14-16, Bellagio Las Vegas

Saving for a Downpayment Takes Time and Sacrifice, but the Payoff Remains By Jessica Lautz

ACUMA’s Exhibit at the 2014 NAR By Bob Dorsa

Efficiency to its Mortgage Process

By Bob Dorsa

May 20-21, San Francisco – June 30-July1, Boston

6 7 8

10 Credit Union Uses eRegistry for eNotes to Bring 21st Century 13 ACUMA Sets new record for 2014 Annual Conference Attendance… 18 ACUMA 2015 Real Estate Lending Workshops, Why Should You Attend?

20 Millennials: Challenge and Opportunity By Ann Clurman and Rob Callender

30 U.S. Macro Outlook 2015: Spirits Unleashed By Mark Zandi

40 The Intricate Art of Today’s Mortgage Underwriting By Jerry DeMuth

46 The Infrastructure Predicament By Terry Wakefield

55 Market Share–Credit Unions Are Holding On! By Tracy Ashfield

January 2015 - PIPELINE 1

From the desk of ACUMA PRESIDENT BOB DORSA ACUMA

PIPELINE MAGAZINE

CU Mortgage Lending

A real alternative for members As I watched the President’s State of the Union message this week he reminded us of the tough times our nation has endured the past few years. It is great news that our economy is back on track and the future is once again bright for many. From our corner of the world, the recognition that Credit Unions are perhaps the only real alternative for consumers seeking competitive housing finance options. Since ACUMA began in 1996 this has been a resilient theme propelling us forward. More and more Credit Unions have discovered that home loans are the key driver for financial security and member satisfaction. We have witnessed in the past decade our market share rise from a mere 2% at the beginning on this century to above 8% today and constantly rising to our 10 year goal to reach double digits by the end of next year. While achieving goals are most important to business leaders, in the case of Credit Unions assisting borrowers with home loans speaks to the fundamental fabric of our business, dating back to our origins. The updated version would be instead of pooling funds in a single sponsor or affinity group, Credit Unions have found a real niche originating and more importantly servicing those loans in the communities in which they serve. This comment was echoed by the President of the NAR at ACUMA’s Fall Conference. Brown also reflected on the parallel in what Credit Unions do best to what REALTORS® do best, serve the community in which they live, work and share. We had many conversations this past year around the topic of working with Realtors. I content we may be over thinking this issue. If we just get back to basics we have more in common with Realtors than we know. Now is the real opportunity. We have an entire new generation of younger borrowers entering the home-buying marketplace. Many of these individuals may not be that familiar with what Credit Unions offer. I see this as the perfect introduction. Working together with REALTORS® in your community you can provide valuable information and trust sought by just about every borrower. In return securing the loan will give your organization an opportunity to grow based on leveraging the business relationship with the borrower for additional CU products and services. So the table is set. ACUMA works hard each every day to make this job a little easier. Whether exploring building relationships through the National Association of Realtors to providing outstanding education to learn from professional and peers alike those all important best practices to success. There are no shout cuts but we know our devoted professional real lending professional have a resiliency second to none. I look forward to speaking with many of you and seeing some you at our 2015 Educational events. It doesn’t get much better than this! Respectfully, Bob Dorsa, President/Founder

2 PIPELINE - January 2015

ACUMA Pipeline is a publication of the American Credit Union Mortgage Association, PO Box 400955, Las Vegas, NV 89140.

Bob McKay

Baxter Credit Union Chairman

Mark Wilburn Truity Credit Union Vice Chairman

Pam Davis

Delta Community CU Treasurer

Barry Stricklin Tower FCU Secretary

John Reed

Maine Savings FCU Director

Tim Mislansky

Wright-Patt Credit Union Director

Michael Patterson, Financial Partners Credit Union Director

Bob Dorsa President

The information and opinions presented here should not be construed as a recommendation for any course of action regarding financial, legal or accounting matters by ACUMA, The ACUMA Pipeline or its authors. © Copyright 2014 by ACUMA. All rights reserved. Printed in the USA

Join us Pictured above: ACUMA President Bob Dorsa and Tracy Ashfield.

Why

should you join ACUMA? Because, just like you, we realize the importance of CU mortgage lending to the future of the credit union movement. ACUMA is:

v an association whose only mission is CU mortgage lending with a membership made up exclusively of credit union professionals and their primary suppliers. v dedicated to serving the mortgage needs of both current and prospective credit union members and their families. v a committed advocate of CU mortgage lending constantly promoting the benefits of our programs and the value of membership. v actively working to build relationships with REALTORS速, Home Builders and other influential housing affiliated groups. v the single most powerful resource available when it comes to networking, relationship building and growing your market share. Join us today at

www.acuma.org

In the pipeline: Insights and observations on CU mortgage lending

Mortgage Insurers Start the New Year with New Master Policies By Arch Mortgage Insurance Company The Great Recession launched an era of sweeping change for the mortgage lending industry – change that is still unfolding as we move into 2015. Mortgage lenders, including credit unions, naturally felt the greatest impact as new regulations and safeguards were introduced to the home purchase process and mortgage finance system. However, private mortgage insurers (MIs) were also affected. The cornerstone of any mortgage insurance business is the master policy, which specifies the responsibilities of both the insurer and the insured. In the wake of the housing meltdown, with its revelations that many insured loans had been underwritten incorrectly, Fannie Mae and Freddie Mac – the Government Sponsored Entities (GSEs) that purchase insured mortgages from lenders – and their regulator and conservator the Federal Housing Finance Agency (FHFA), called for an overhaul of the private MIs’ master policies with the goal of standardizing certain terms, including terms

The new master policies were written to more clearly define the circumstances under which mortgage insurance must be retained 4 PIPELINE - January 2015

related to when and for what reasons the mortgage insurers could rescind coverage on a loan. In late 2012, the GSEs, in conjunction with the FHFA, provided a framework for MIs to develop new master policies that would cover those loans purchased by the GSEs, with an emphasis on: n Standardizing certain terms from policy to policy n Introducing process transparency, particularly for claims n Enhancing clarity of coverage n Improving operational efficiencies The MIs were required to draft and submit new master policies to the GSEs and the FHFA in early 2014. After the GSEs and FHFA approved the new master policies, the MIs submitted them to state regulators for approval. The GSEs targeted October 1, 2014, as the required effective date of the new master policies. The MIs met the challenge and debuted their new policies in October 2014. As we move into 2015, lenders may find that they benefit from the greater standardization. The responsibilities of all parties to the transaction – the mortgage originator, the servicer, and the MI – are now clarified to a greater extent than ever before in the industry.

New Options for Rescission Relief

Receiving particular scrutiny in the development of the GSE framework was the issue of rescissions. During the recession, mortgage insurers rescinded coverage on a number of loans they discovered to contain fraud or to have been incorrectly underwritten by the lender when originated and submitted for mortgage insurance. As

The Great Recession launched an era of sweeping change for the mortgage lending industry – change that is still unfolding as we move into 2015. MI master policies varied among themselves as to the valid conditions for rescission, lenders found the language confusing and the differing standards relating to rescission frustrating. Rescissions rapidly became a major concern for mortgage originators, with broader implications for the industry as a whole. The new master policies were written to more clearly define the circumstances under which mortgage insurance must be retained on individual loans and when it may be rescinded. Following the GSE requirements, they include relief from rescissions on loans after 36 months, or after as little as 12 months provided that the loan files were fully reviewed by the MI company, and so long as the borrower has made timely loan payments. With clearer expectations laid out for both parties in the updated policies, lenders can feel greater confidence in choosing MI as their preferred means to expand homeownership opportunities.

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ACUMA 2015 Annual Conference

Join us for an unforgettable learning experience in a truly inspiring environment

September 14-16, 2015, Bellagio, Las Vegas Every year ACUMA strives to make our annual conference the best ever. We do it by bringing nationally known speakers, a program tailored precisely to your needs and state of the art conference technology together into a seamless educational experience. Throw in an outstanding venue, sumptuous dining and time to network with the best and brightest in the CU mortgage industry and you have a one of a kind, canâ&#x20AC;&#x2122;t miss experience. You can count on ACUMA to deliver an informative program designed to meet the needs of todays CU mortgage lending professionals. Our program features expanded networking opportunities, special interest breakout sessions and general sessions featuring some of the brightest stars in the industry What will we do to make it better in 2015? Plan to join us again September 14-16, at The Bellagio, Las Vegas, and find out.

Visit acuma.org for details

Loan from financial institution other than a mortgage Sale of personal property Life insurance Investment property sales (1031 exchange) Equity from refinanced investment property Credit from lease option to buy Loan or financial assistance through employer Loan or financial assistance from source other than employer Other

In the pipeline: Insights and observations on CU mortgage lending

NA NA NA NA NA NA NA NA NA

NA 2 1 2 1 1 NA NA 8

NA NA NA NA NA NA NA NA 6

NA=Not asked * Less than 1 percent

Saving for a Downpayment Takes Time and Sacrifice, but the Payoff Remains Jessica Lautz, Director, Survey Research and Communications, NAR Many economists have predicted this is the year of the return of the firsttime home buyer. Last year, data collected from the 2014 Profile of Home Buyers and Sellers reported the lowest level of first-time buyers since 1987—33 percent in 2014, vs. 30 percent in 1987. The historical norm of first-time home buyers among primary residence purchases is 40 percent. Market conditions such as low inventory, difficulty accessing credit, competition with investors, and difficulty saving for a downpayment all are factors for first-time home buyers. The majority of home buyers use savings as a downpayment source—65 percent of all buyers (81 percent of firsttime buyers, 57 percent of repeat buy-

Length of Time Buyers Take to Save for a Downpayment Data from National Association of REALTORS® Profile of Home Buyers and Sellers 2014

Figure 1

Saving for a down payment

Length of Time Buyers Take to Save for a Downpayment

24 months to 5 years 16%

More than 5 years 13%

18 to 24 months 9% 12 to 18 months 10%

6 months or less 37%

6 to 12 months 15%

Source: National Association of REALTORS® Profile of Home Buyers and Sellers

ers). Using savings as a downpayment source has increased in prominence over the last 14 years as buyers are relying less frequently on the proceeds from the sale of their primary residence. Saving for a home can take time for home buyers, Figure 1, Among recent home buyers, 37 percent saved for six months or less, 15 percent saved for six to 12 months, and 10 percent saved for 12 to 18 months. Home buyers often make sacrifices on their path to homeownership. 72 percent cut spending on luxury or non-essential items, 56 percent cut spending on entertainment, and 45 percent cut spending on clothes. There is a light at the end of the tunnel for those saving. Eighty-eight percent

of recent home buyers financed their home purchase. The typical downpayment was 10 percent for all buyers, but six percent for first-time home buyers and 13 percent for repeat home buyers. The payoff for home buyers is worth it. Seventy-nine percent of recent buyers believe their home is a good financial investment, and many believe it is a better financial investment then stocks. Aside from the financial investment, buyers were able to successfully complete their goal which was just to own a home of their own. The complete report is available at: http://www.realtor.org/reports/highlights-from-the-2014-profile-of-homebuyers-and-sellers.

DDownpayment Sources Among Home Buyers 1997-2014 1997 2000 2003 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Savings NA 57% 49% 50% 50% 52% 56% 54% 66% 67% 65% 64% 65% Proceeds from sale of primary residence NA 35 37 43 44 43 34 23 22 26 25 31 33 Gift from relative or friend NA 13 12 11 9 10 13 14 18 14 14 14 14 Sale of stocks or bonds NA NA 6 6 7 8 8 6 7 10 8 9 9 Equity from primary residence buyer continues to own NA NA NA NA 5 5 4 2 2 3 2 2 * 401k/pension fund including a loan NA 5 5 5 4 4 5 5 7 8 9 8 9 Loan from relative or friend NA 4 5 5 4 3 5 4 6 5 4 4 4 Proceeds from sale of real estate other than primary residence NA NA NA NA 3 2 2 1 2 2 1 2 2 Inheritance NA 3 2 3 2 3 4 3 4 5 4 4 4 Individual Retirement Account (IRA) NA 3 3 2 2 2 3 2 3 4 5 4 3 Loan from financial institution NA 2 6 NA NA NA NA NA NA NA NA NA NA Loan from financial institution other than a mortgage NA NA NA 6 2 2 1 1 1 1 1 1 1 Sale of personal property NA 2 NA NA 1 1 * * * * * * * Life insurance NA 1 NA NA 1 1 * * * * * * * Investment property sales (1031 exchange) NA 2 NA NA 1 1 * * * * * * * Loan or financial assistance through employer NA NA NA NA NA NA NA NA NA * 1 2 1 Loan or financial assistance from source other than employer NA NA NA NA NA NA NA NA NA 2 2 * * Other NA 8 6 7 4 * 5 4 4 4 4 3.5 4 NA=Not asked * Less than 1 percent Source: National Association of REALTORS® Profile of Home Buyers and Sellers 1997-2014

January 2015 - PIPELINE 7

ACUMA MEMBERInsights Benefit Networking at the NAR In the pipeline: and observations on CU mortgage lending

ACUMA’s Exhibit at the 2014 NAR By Bob Dorsa 2014 marked the 12th anniversary for ACUMA exhibiting at the NAR (National Association of Realtors®). This has become an annual event for us and our dedicated Credit Union sponsors. Over the years in addition to our exhibit we have participated in breakout sessions in 4 of those years. I am often asked what I gain from this experience and what can we expect for the future. The NAR is America’s largest trade association with more than 1 million members. Their Annual Convention and Expo brings together the leading players in the housing industry, including the lenders. Since 2009 interest rates have dropped to historic levels coinciding with the Housing crash and Recession. During this time the housing industry and all its connected branches, have restructured for the future. Fortunately ACUMA had been involved with the NAR since 2003 and established a sound foundation relative to Credit Unions’ emergence as a more viable alternative

to the major money center banks. We know credit unions have been the rock following long established safe and sound lending practices which date back decades. With little wavering the Credit Union system has quadrupled its market share in first mortgage lending over the past decade. The Annual NAR event is the opportunity to network with the best and brightest in Housing Finance as we proudly display the America’s Credit Union’s official industry logo, as our industry’s representative for all to see. This was a strategic decision made in the very beginning. We determined a while ago we needed to get back to basics and present the Credit Union system in a much favorable light, particularly to the nation’s Realtors®. At our ACUMA 2014 Annual Conference we were fortunate to have the NAR’s President address our audience. Steve Brown spoke eloquently about the importance of community as one

The 2014 America’s Credit Union was located near the entrance

8 PIPELINE - January 2015

Phil Reichers, PenFed, shares the CU Message of the pillars of our society. Having personal business experience working with a Credit Union lender and seeing first hand the way his clients were treated resonated with Steve and his beliefs about his community. He spoke of prior relationships with lenders who had no vested interest in the location of the property, it was another file and maybe little more. My reason for referring to Steve Brown’s words is it relates directly to our presence at the NAR Exhibit. Along with a group of devoted participants from our Sponsoring Credit Unions (The NAR is a weekend event each year in November) we stood not too far away from Wells Fargo in terms of physical location in the hall. We capitalized on the opportunity to meet and greet professional Realtors® and a wide array of professionals who work in and around the housing industry. We have thoroughly enjoyed meeting thousands of people during our tenure. Several years ago we developed a contest of sorts whereby we select willing convention goers who are both professional Realtors® and current members of a Credit Union. We asked for a very short sound bite responding to the question of “what do they like about their Credit Union?” We have several dozen great video clips from recent years and a few incredible testimonials to several of our ACUMA members for the great job you do! I think many of you would suspect if I reported the first thing on the mind of these Credit Union member/Realtors® was sending their clients or themselves for that matter over to their CU for their home

In the pipeline: Insights and observations on CU mortgage lending

loan. You may not be surprised that their top responses include, “I like they know my name”, “it’s the least expensive car loan I could find” to “a great way for me to send money to my child at college (age reference) and perhaps one of the most recognizable features, “free checking accounts.” Once we cover the basics I have attempted to probe further to get to what we do every day, home loans. Many are tuned and some even have loans with their CU. Mostly HELOCs but a loan is a loan! As those who know me can guess, I had to dig deeper. When I asked the question referring to first mortgage loans I would say 30% indicated they had a positive experience or funding. The balance did not even realize their CU offered loans (in some cases people belonged to CUs not offering home loans) or they share many of the old time beliefs that the CU was ONLY available to certain people; CU staff do NOT work weekends (the time Realtors® sit in Open Houses) or I have a great relationship with my Originators and no one from any Credit Union has ever visited our office. Several of our Exhibiting sponsors got to meet Realtors® face-to-face for the first time. I do actually have a few video clips of Realtors® discussing their loan experience with one of our CUs on site. It was great to hear but there were far too few. My feeling is this provides great insight to what Credit Unions need if you want to participate in the Realtor® marketplace. We know sooner than later the Refi-mania will diminish. Competition for Purchase money loans has already increased and despite changing regulations it may be difficult getting applications in the future. ACUMA has been focusing on these issues for the past few years. To some degree our increase in market share was due to refinance transactions, no Realtor® and a relatively simplified transaction, in real estate lending terms. Each Credit Union needs to validate your Purchase money loan strategy. Starting with, do you have one? We have observed many successful internal programs and affiliations with their party marketing organizations. One of the key ingredients has to be the communication with the

The America’s Credit Unions NAR Exhibit Staff Realtor® or Broker. This will start with egy to grow each Credit Union and focus education and meeting in their offices on the future for millennial and even and perhaps invited them to your office. minority members is greatly improved You should be certain to have “the right working through the housing channel. I person” engaged in the relationship from would be remiss if I did not add the fact the start. You must decide who the right originally offered 20 years and validated person is but remember in your analy- many times since then. When you have a sis to evaluate your competition and de- home loan with a borrower, that borrower termine what they are doing since they is likely to acquire between four and eight are likely competing for the same loans financial products from the financial inyou are? Finally I feel very comfortable stitution providing their home loan. I encouraging you to comb through your think we will need updated strategies to membership files. If we are able to find as meet the needs of multiple demographic many Realtors® who are members of groups in the marketplace and if you have a Credit Union then I believe it is key for not yet started you have a lot of catching each credit union to know and establish up to do. contact with your member who is a ReI hope you got something out of all of altor®. Unfortunately I do NOT have this but in any case here are some images the magic formula or wisdom how you of our fabulous weekend last November. do this but with Social Media and a local If you have a comment or a question, or community presence that should be a please do NOT hesitate to contact me at good starting point. bdorsa@acuma.org or post a comment With recognition to all our ACUMA on our LinkedIn Group, ACUMA. members who contributed to our NAR Sponsorship we thank Great opportunities for networking with REALTORS® at the NAR you. ACUMA is pleased to facilitate this exhibit and put the Credit Union Brand on display. The future will indeed be challenging. A new generation of buyers with perhaps different lifestyle priorities has already made their voice heard in the marketplace. I for one still believe the strat-

January 2015 - PIPELINE 9

In the pipeline: Insights and observations on CU mortgage lending

Credit Union Uses eRegistry for eNotes to Bring 21st Century Efficiency to its Mortgage Process A big realization during this process is the benefit of data over paper— it reduces our ecological footprint. There is less wasted paper, less toner usage and we experienced a reduction in courier and shipping costs. In addition, the process was more efficient. There is no rekeying, resulting in greater accuracy. Once the data is there, it never has to be moved—it is just there.

10 PIPELINE - January 2015

Technology creates much efficiency for us every day. We shop on line, deposit a check simply by taking a photo of it and sending it via a mobile app, pay bills on line and even receive direct deposits electronically. Each of these processes simplifies our lives every day. In the mortgage industry, an eMortgage happens when critical loan documentation – specifically the promissory note, closing documents and security instrument, are created electronically, executed electronically, transferred electronically and ultimately stored electronically. MERS® eRegistry plays a major role in this process because it is the system of record that identifies who is in control of the eNote and where it is stored electronically. And, yes, this is reality and it is done every day. To explore how eMortgages impact a credit union’s operations, its members and even investors, we spoke with Steve Wolf, System Administrator, Home Loans Department at Boeing Employees’ Credit Union (BECU). Mr. Wolf shared BECU’s experience using the MERS® eRegistry for eNotes. To provide some perspective on its mortgage operation, BECU originates more than $1 billion in mortgage loans per year and has more than 850,000 members.

How did eNotes come to your attention? What made you inclined to learn more?

In 2006, a goal at BECU was to eliminate paper from the beginning to the end of the mortgage loan process and

I was asked to explore eNotes. At that time, the credit union had a paperless application process, but we still used folders for files, generated paper docs and sent document images that were printed on paper at closing. The vision was paperless from the application process to signing and funding the loan. We were successful in our vision and the first eSigning occurred in October of 2007. A big realization during this process is the benefit of data over paper—it reduces our ecological footprint. There is less wasted paper, less toner usage and we experienced a reduction in courier and shipping costs; as well as a reduction in our couriers’ carbon foot prints— this is big. In addition, the process was more efficient. There is no rekeying, resulting in greater accuracy. Once the data is there, it never has to be moved—it is just there. Paper can get lost or misfiled; eNotes provide for accurate data all the way through the process. While there have been hiccups with eNotes, we’ve always been able to track them down and they contribute to better transparency and compliance tracking. It is a beautiful thing and it is now a true paperless process from beginning to end.

Q: A:

How did employees like the new process? There were early adopters who embraced the change. Others focused on how it had always been done and it was a challenge for some employees. Ultimately, they came around.

In the pipeline: Insights and observations on CU mortgage lending

We discussed the credit union’s experience, what has the member experience been with eClosings?

The member experience helped drive the process from the beginning. The electronic process is much simpler because it really only includes two signatures—a paper closing can be overwhelming and require signing between 25 and 40 documents. Members benefit because of the speed of which closings can happen. Further, eNotes have made it easier for us to meet the Consumer Finance Protection Bureau‘s (CFPB) “Know Before You Owe” (KBYO) requirement that takes effect on August 1, 2015. This is a new requirement that borrowers have the opportunity to review their documents three days before a signing. eNotes put BECU ahead of the curve because this requirement is already met.

Q: A:

I have heard you use the term “Coffee Shop Signing.” What does this mean? Members like eNotes because a closing can occur in the comfort of their own home—or even at a coffee shop. A real benefit is that they are able to review documents before the signing. A closing can happen anywhere and documents can be signed on a tablet. In the beginning, we incented members with a gift card to use eClosings, but that is no longer necessary. Members gravitate toward the eSignings on their own. eNotes provide efficiency, a quicker closing and there is no paper—it’s very cutting-edge.

Q: A:

Do members have to use eNotes when refinancing or purchasing a home? We give our members the option of an eNote process or the traditional paper based approach when they refinance or originate a home loan and the response has been favorable. In fact, 65 percent of our mortgage lending is refinances and of those refinances about 50 percent are eClosings. The reason the emphasis is primarily on refinances is because the

credit union does not direct the eSigning closing process on purchases, as it does with an eSigning closing on refinances. In most cases, realtors direct the selection of a closing agent on purchase transactions and many escrow companies may not have the eSigning pad, tools and the training needed for eSignings, so it cannot be done. This is sometimes a challenge. However, if all the parties have the right tools, eClosings can be used for home purchases.

Q: A:

What has the investor response

been? BECU primarily sells to Fannie Mae if it does not hold the loan in portfolio. Fannie Mae has been enthusiastic and helps drive the process. eNotes allow investors to receive loans faster, they can review them electronically and the credit union receives its funds faster because there is no shipping involved. Other investors beyond just Fannie Mae are beginning to see the benefits of the eNote process.

What is different about servicing eNotes? Are there challenges?

UPCOMING

We have not experienced any challenges servicing eNotes—including with foreclosures or charge offs. They have been handled the same and have gone well during the past seven years since the inception of eNotes.

When starting the eNote process, would you recommend using a trusted vendor or creating your own internal systems to manage the process?

We rely on our vendor partners for the technology expertise. I cannot imagine creating this process from start to finish—just the technology required alone is intense. And, there are good solutions out there—take advantage of what’s available. I definitely recommend using a vendor to help establish the eNote process.

Q: A:

In closing, is there anything you would like to add? We love our eSigning process. This is how we became involved with MERSCORP Holdings, Inc. and the MERS® eRegistry, and it has been a successful relationship.

2015

EVENTS

You can count on ACUMA to provide an innovative program, unmatched networking and an outstanding venue. Save the dates to join us in 2015!

ACUMA WORKSHOP

Hilton Union Square Hotel San Francisco, CA May 20-21 2015.

Westin Copley Plaza Boston, MA June 30-July 1, 2015

2015 Annual Conference Bellagio Las Vegas September 14-16, 2015

Visit acuma.org for more information

January 2015 - PIPELINE 11

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In the pipeline: Insights and observations on CU mortgage lending

ACUMA Sets new record for 2014 Annual Conference Attendance… By Bob Dorsa Last September, ACUMA reached a new milestone, bringing together nearly 400 mortgage banking professionals at our 18th Annual Conference. We have learned quite a lot in almost two decades. We take great pride that the public awareness of Credit Union mortgage lending is much higher than when we started in 1996. One of the initial goals for ACUMA was to “increase the awareness” of Credit Union mortgage lending. We have watched our market share more than quadruple from a lack luster of 2% in the mid-90s to in excess of 8% today. I believe this achievement is nothing short of amazing and I would be the first one to say it is the resiliency and dedication of a core group of progressive credit unions that has made it possible. CUs believing in the value this important product provides to the overall growth and financial stability of the credit union overall. ACUMA has grown to more than 260 of the nation’s leading mortgage lending CUs. We are still adding members as more and more credit unions figure out that without mortgage lending and all the related benefits, the future for their organization is bleak. What does this have to do with last year’s record setting attendance? Yes, Las Vegas is an exciting venue for

Steve Farber - Discussing Leadership.

General Ballroom with more than 350 participants and 22 Exhibiting Sponsors.

an event. That said, I recall a comment made to me during our the conference by a speaker from outside our immediate CU mortgage lending family. He was quite impressed that the majority of our conference participants attend and engage in the various breakout sessions. A testament to the high value of our educational sessions and Networking Receptions, as well as the dedication of our attendees. So how was this year’s event different? When planning our 2014 Annual Conference we considered our agenda first. We looked at the critical topics and it was apparent that there were many, too many, and we only had 2 and ½ days. At that point we made a decision to add additional workshops prior to the formal start of our event, as many people like to arrive and enjoy Las Vegas prior to our event. We thought that some might be interested in getting right into it Monday morning, before our official noon conference start. We were amazed, of the nearly 400 partici-

pants, more than 250 were in the hotel Sunday. This was great and that group got the additional pre-conference workshops first thing Monday. These sessions were all great. One discussion session, Know-Before-You-Owe, comes to mind; also covered were Loan Servicing, and a growing focus on dealing with Millennials and borrowers with very different demographic characteristics than CUs are accustomed to. These sessions were strictly voluntary and just about all of the seats were full. Next we headed to the formal program. Our first Keynote Speaker was Steve Farber. His message on Leadership was in step with our overall focus and was delivered with the right blend of enthusiasm and thought-provoking nuggets to get the audience stimulated. We then moved to our Day 1 Breakout sessions, Compliance, Working Through Complex Regulations with Kris Kully and The Future of Government Lending with Tim Rood. Once again full seating at both sessions. After a brief break was the first of our two Receptions featuring our Conference Exhibitors. Their displays lined the perimeter of the beautiful Encore Ballroom. It is great to see hundreds of professional mortgage banking people

January 2015 - PIPELINE 13

In the pipeline: Insights and observations on CU mortgage lending

Erik Wahl, Unbelievable.

chatting each other up on the single focus of residential housing issues. I’m not really sure there is anything like it anywhere! After the networking many of our devoted sponsoring participants provided additional social activities for the evening. Fortunately, one commodity Las Vegas has in spades is hospitality in the form of restaurants, shows and fun things to do, other than gaming. Day 2 began early with a great Breakfast Buffet for 300. Obviously there are still a few folks who need more sleep and/or a quick workout prior to beginning their day’s activities. We began the program with the nationally renowned Economist Dr. Mark Zandi. ACUMA first met Dr. Zandi a decade ago and his rise to national acclaim endears him to our cause. We often see Dr. Zandi on CNBC or CNN. He has shared his annual economic forecast with Pipeline readers each year since 2009. (See page 30 for his report on 2015) As always Zandi’s forecast was spot on and he possess both elegance and charisma in his connection with ACUMA members. Following Dr. Zandi was a speaker best described as “truly talented and amazing.” Erik Wahl

14 PIPELINE - January 2015

is a former corporate executive who turned in his fountain pen for a paint brush. While delivering a very inspirational message Erik painted not one, but TWO, incredible pieces of art. He began with a tease and illustration describing how people are generally cautious about taking risks. The unexpected result of Erik’s time with ACUMA was that in addition to his message, we retained two beautiful pieces of original art. After the session we held a silent auction of one of Erik’s paintings. The winning bid was $2,000 with the proceeds going to the NAR’s Realtors Relief Foundation. Knowing how difficult it would be for anyone to follow Erik Wahl we then broke for another fantastic Buffet Lunch provided by the Encore. Day 2 afternoon was devoted to six breakout sessions. The topics featured panel discussions addressing; Growing (creating) ARM Loan products; Best Practices in Loan Participations and Loan Underwriting. Other breakout session topics covered, Construction Lending; Partnering and Working with REALTORS®; and a review of Reverse Mortgage Lending markets today. After several hours of intense education it was time for our Day 2 afternoon Wine & Cheese Reception.

Stage filled with President’s

Dr. Mark Zandi.

Of all of the time our participants spend at our events the Networking Receptions generally rank among the most popular. Participants enjoyed the same dynamic atmosphere as the Day 1 reception. Again the evening was filled with more dinners and Vegas night-life enjoyment, which seems to be much more fun with friends and business partners. All of that bring us to the finale, Day 3. We were fortunate to have as our Opening Speaker, Carrie Hunt, General Counsel and Sr. VP from NAFCU. It has been a longstanding goal of ACUMA to engage with our larger trade associations, particularly those focused on the legislative front. Carrie is well versed on all of the mortgage lending related issues and delivered an astute update of what is and should be happening in the coming months. Following Carrie, was the President of the National Association of REAL-

In the pipeline: Insights and observations on CU mortgage lending

Steve Brown - President of the NAR.

of Qualified Mortgages and prospects for the creation of a secondary market for selling NonQualified Mortgages. Speaking was Mitch Hochberg, a former attorney with CFPB. Mitch, along with his new firm, Fenway Summer, is very involved in addressing the prospects of making this a part of the mortgage banking industry and alleviating some issues already frustrating some Credit Union lenders who are caught in the Non-QM world for loan applications from longtime CU members. After another sumptuous Buffet lunch it was off to the final two sessions in the afternoon. We began with a very interesting session presented by Karen Deis, a mortgage industry veteran who took the opportunity to review her best practices as it pertains to achieving success in mortgage banking. Of particular interest were several examples of documents she still uses today with borrowers. Our final session on Loan Origination featured two successful Loan Originator Sales Managers. Nanette Graviet and James Smith formed our panel with the incomparable Tracy Ashfield acting as moderator. Unfortunately, gone are the days of answering the phone and accepting applications from members or check-

TORS® (NAR), Steve Brown. Steve’s Real Estate Brokerage firm has a relationship with a CUSO in Ohio. Steve has observed firsthand the difference between the “credit union” approach to loan origination and servicing versus the banking segment which has dominated for decades. I was enthused by Steve’s views on the similarities between Realtors® and Credit Unions. Both offer the very best service to their respective clients and a great deal of emphasis is placed on the community. I see this as a powerful message and perhaps a sign of how relationships in the housing marketplace are changing. Borrowers and consumers want to deal with lenders who care about the borrower’s needs. Brown emphasized the importance of strengthening this important benefit for borrowers as the competition for loans gets even tighter. Younger borrowers want to be engaged and involved in the transaction and success will be reserved for lenders subscribing to this value. It was also a great privilege to present Steve a check for $2,000, the proceeds of our day 1 auction, made to the Realtors® Relief Foundation, which will help Realtors® in need. We retained one piece of art that we will auction in 2015 for another contribution to the foundation. The final session of the morning was on the topic Networking Lunch begins with the Buffet LIne.

ing with the online origination systems to see what’s new! In today’s world loan applicants are relatively hard to identify and frequently the originator is immersed in intense competition for the loan. The panelists were qualified Originators and Managers and their Credit Unions rank high on the charts of Loan Originator production. Great information and even in the late af- Tracy Ashfield - Co-Host of ACUMA’s ternoon on Day 3 Annual Conference. still several hundred people in attendance. As ACUMA’s President this is the best evidence I can see to validate the quality and appreciation of all of the hard work we put in to hosting this event. As an added benefit, all of ACUMA’s members receive Podcast Digital Recordings of each and every session. There was a huge amount of material presented. It would be an injustice to return to the Credit Union with just slide presentations. Having the digital recordings simplifies sharing and networking within each of our member Credit Union’s organizations, making it that much easier to spread the word. This is just another example of our continuing commitment to provide as much value as possible to both those in attendance and to those back in the office. Our 2015 Fall Annual Conference will be held at the Bellagio Resort and Hotel in Las Vegas beginning on September 14 and concluding on September 16, 2015. If you are NOT currently a member and want information to join with us, please do NOT hesitate to contact me at bdorsa@ acuma.org. ‘

January 2015 - PIPELINE 15

THANK YOU We want to thank our over 300 members for the commitment they make to being Member’s top choice for real estate loans. 1st Mid America Credit Union, Bethalto, IL 1st United Services Credit Union, Pleasanton, CA A+ Federal Credit Union, Austin, TX ABNB Federal Credit Union, Chesapeake, VA Advantiis Credit Union, Milwaukee, OR Advia Credit Union, Janesville, WI Aerospace Federal Credit Union, El Segundo, CA Affinity Plus Federal Credit Union, St. Paul, MN Air Academy Federal Credit Union, Colorado Springs, CO Air Force Federal Credit Union, San Antonio, TX Alaska USA Federal Credit Union, Anchorage, AK Align Credit Union, Lowell, MA Allegiance Credit Union, Oklahoma City, OK Alliance Credit Union, San Jose, CA Alliant Credit Union, Chicago, IL AllSouth Federal Credit Union, Columbia, SC Altra Federal Credit Union, LaCrosse, WI AmerChoice Federal Credit Union, Mechanicsburg, PA America’s First Federal Credit Union, Birmingham, AL American Airlines Emp. FCU, Fort Worth, TX Andrews Federal Credit Union, Suitland, MD Anheuser-Busch Employees’ CU, St. Louis, MO Arch Mortgage Insurance Company, Walnut Creek, CA Arizona State Credit Union, Phoenix, AZ Arkansas Federal Credit Union, Jacksonville, AR Atlantic Regional Federal Credit Union, Brunswick, ME Baxter Credit Union, Vernon Hills, IL Bay Ridge FCU, Brooklyn, NY Bayport Credit Union, Newport News, VA BECU, Tukwila, WA Bellco Credit Union, Greenwood Village, CO Bethpage FCU, Bethpage, NY Bourns Employees FCU, Riverside, CA California Credit Union, Glendale, CA Campus USA Credit Union, Gainesville, FL Casco FCU, Gorham, ME CBC Federal Credit Union, Oxnard, CA CEFCU, Peoria, IL Centris Federal Credit Union, Omaha, NE CFE Federal Credit Union, Lake Mary, FL Chevron Credit Union, Oakland, CA Citadel Federal Credit Union, Exton, PA Citizens First Credit Union, Oshkosh, WI

Coastal Federal Credit Union, Raleigh, NC CoastHills Federal Credit Union, Lompoc, CA Colorado Credit Union, Littleton, CO Commonwealth Credit Union, Frankfort, KY Community CU of Florida, Rockledge, FL Community Financial, Plymouth, MI Community First Credit Union, Appleton, WI Community First CU of FL, Jacksonville, FL Community Mortgage Funding, LLC, Pomona, CA Community Resource Credit Union, Baytown, TX CommunityAmerica Credit Union, Lenexa, KS Congressional FCU, Oakton, VA Consumers Credit Union, Mundelein, IL Consumers Credit Union (MI), Oshyemo, MI Coors Credit Union, Golden, CO CoVantage Credit Union, Antigo, WI Credit Union Oak Lawn, IL Credit Union Mortgage Association, Fairfax, VA Credit Union of America, Wichita, KS Credit Union of Colorado, Denver, CO Credit Union of Southern California, Brea, CA CU Companies, New Brighton, MN CU Home Mortgage Solutions, Seattle, WA CU Mortgage Direct. LLC., Sioux Falls, SD CUC Mortgage, Albany, NY CUMAnet, LLC, Basking Ridge, NJ CUSO Mortgage (CA), Anaheim, CA CUSO Mortgage Corp., Hampden, ME Cyprus Federal Credit Union, West Jordan, UT DATCU, Denton, TX Delta Community Credit Union, Atlanta, GA Denali Alaskan FCU, Anchorage, AK Desco Federal Credit Union, Ashland, LA Desert Schools FCU, Phoenix, AZ DFCU Financial, Dearborn, MI Digital Federal Credit Union, Marlboro, MA Dupaco Community Credit Union, Dubuque, IA DuPage Credit Union, Naperville, IL Dupont Community Credit Union, Waynesboro, VA Eastman Credit Union, Kingsport, TN Educational Systems FCU, Greenbelt, MD Educators Credit Union, Racine, WI EECU, Fort Worth, TX

Elevations Credit Union, Boulder, CO Eli Lily FCU, Indianapolis, IN Empower Federal Credit Union, Syracuse, NY Ent Federal Credit Union, Colorado Springs, CO Envision Credit Union, Tallahassee, FL FAA Credit Union, Oklahoma City, OK Fairwinds Credit Union, Orlando, FL Fibre Credit Union, Longview, WA Financial Partners Credit Union, Downey, CA First Entertainment Credit Union, Hollywood, CA First Heritage Financial, LLC, Phildelphia, PA First Light Federal Credit Union, El Paso, TX First New England FCU, East Hartford, CT First Tech Credit Union, Beaverton, OR Five County Credit Union, Bath., ME Five Star Credit Union, Dothan, AL Foothill Federal Credit Union, Arcadia, CA FORUM Credit Union, Fishers, IN Fox Communities Credit Union, Appleton, WI Ft. Knox Federal Credit Union, Radcliff, KY Georgia United CU, Duluth, GA Gesa Credit Union, Richland, WA Golden 1 Credit Union, Sacramento, CA Great Lakes Credit Union, Naperville, IL Great River Federal Credit Union, St. Cloud, MN Grow Financial FCU, Tampa, FL GTE Financial, Tampa, FL Guardian Credit Union, Montgomery, AL Hapo Community Credit Union, Richland, WA Harborstone Credit Union, Tacoma, WA Heartland Credit Union , Springfield, IL Heartland Credit Union , Madison, WI Hiway Federal Credit Union, St. Paul, MN Honda Federal Credit Union, Marysville, OH Horizon Credit Union CUSO, LLC, Spokane Valley, WA Hudson Valley FCU, Poughkeepsie, NY IC Federal Credit Union, Fitchnurg, MA Idaho Central Credit Union, Chubbuck, ID Ideal Credit Union, Woodbury, MN Jeanne D’Arc Credit Union, Lowell, MA Justice Federal Credit Union, Chantilly, VA Keesler Federal Credit Union, Biloxi, MS Kern Schools FCU, Bakersfield, CA

Kinecta Federal Credit Union, Manhattan Beach, CA Knoxville TVA Employees CU, Knoxville, TN Lafayette Federal Credit Union, West Kensington, MD Lake Michigan Credit Union, Grand Rapids, MI Landmark Credit Union, New Berlin, WI Langley Federal Credit Union, Newport News, VA Leominster Credit Union, Leominster, MA Local Government Federal Credit Union, Raleigh, NC Lockheed GA Empls FCU, Marietta, GA Los Angeles Firemen’s Credit Union, Los Angeles, CA Los Angeles Police Federal Credit Union, Van Nuys, CA Maine Savings FCU, Hampden, ME MECU, Schaumburg, IL Member First Mortgage, LLC, Grand Rapids, MI Members Choice Credit Union, Houston, TX Members Mortgage Services, Hutchinson, KS Merck Sharp & Dohme Federal CU, Chalfont, PA Meritrust Credit Union, Wichita, KS Meriwest Mortgage Company, San Jose, CA Merrimack Valley Federal CU, Lawrence, MA Metro 1st Mortgage, Omaha, NE Metropolitan Credit Union, Chelsea, MA Michigan Community Credit Union, Jackson, MI Michigan Schools & Government CU, Clinton Township, MI Mill City Credit Union, Minnetonka, MN Missoula Federal Credit Union, Missoula, MT Mortgage Lending Services, LLC, Plymouth, MN Mountain America Credit Union, West Jordan, UT Municipal Credit Union, New York, NY myCUmortgage, Beavercreek, OH NASA Federal Credit Union, Upper Marlboro, MD Navy Federal Credit Union, Merrifield, VA Neighboorhood Mortgage Solutions, Frankenmuth, MI Neighbors Credit Union, Saint Peters, MO NorthCountry FCU, Burlington, VT Northern Federal Credit Union, Watertown, NY Northwest Federal Credit Union, Herndon, VA Numerica Credit Union, Spokane, WA Ocean Communities FCU, Biddeford, ME Oklahoma Central Credit Union, Tulsa, OK Orange County’s Credit Union, Santa Ana, CA Oregon State Credit Union, Corvallis, OR ORNL Federal Credit Union, Oak Ridge, TN Pacific Credit Union, Fullerton, CA Accenutre Mortgage Cadence, Denver., CO Advantage Credit, Inc., Evergreen, CO American Reporting Company, Lynwood, WA AmeriCU Mortgage Company, Troy, MI Black Knight Financial Services, Inc., Jacksonville, FL BOK Financial Correspondent Mortgage Serv, Tulsa, OK Cartus Corporation, Irving, TX CORELogic, San Francisco, CA Credit Plus, Inc, Salisbury, MD CU Appraisal Services, Fairborn, OH CU Members Mortgage, Dallas, TX CU Partners, Santa Ana, CA CU Realty Services, Castaic, CA CUNA Mutual Group, Milwaukee, WI D+H, Mequon, WI DGU Insurance Associates, Inc., Greensboro, NC Dovenmuehle Mortgage, Inc., Lake Zurich, IL Equifax Mortgage Solutions, Scottsdale, AZ Essent Guaranty, Inc., Radnor, PA

Park View Federal Credit Union, Harrisonburg, VA Partners Federal Credit Union, Lake Buena Vista, FL Patelco Credit Union, Citrus Heights, CA Pen Air Federal Credit Union, Pensacola, FL Pentagon Federal Credit Union, Alexandria, VA Philadelphia Federal Credit Union, Philadelphia, PA Piedmont Advantage Credit Union, Winston-Salem, NC Pima Federal Credit Union, Tucson, AZ Police & Fire Federal Credit Union, Philadelphia, PA Polish & Slavic FCU, Brooklyn, NY Premier America Credit Union, Chatsworth, CA Premier Source Credit Union, E. Longmeadow, MA Professional FCU, Ft. Wayne, IN ProMedica FCU, Toledo, OH Purdue Employees Federal Credit Union, Lafayette, IN Qualstar Credit Union, Redmond, WA Randolph-Brooks FCU, Universal City, TX Red Canoe Credit Union, Longview, WA Red Crown Credit Union, Tulsa., OK Redstone Federal Credit Union, Huntsville, AL Redwood Credit Union, Santa Rosa, CA River Region Credit Union, Jefferson City, MO Robins Federal Credit Union, Warner Robins, GA Rogue Federal Credit Union, Medford, OR Royal Credit Union, Eau Claire, WI San Antonio Credit Union, San Antonio, TX San Diego County Credit Union, San Diego, CA Schools First FCU, Santa Ana, CA Scott Credit Union, Edwardsville, IL Seasons Federal Credit Union, Middletown, CT Seattle Metropolitan CU, Seattle, WA SECU, Lintchicum, MD Security Service Federal Credit Union, San Antonio, TX Service Credit Union, Portsmouth, NH Sharonview FCU, Ft. Mill, SC Shell FCU, Deer Park, TX Silver State Schools Mortgage Co., Las Vegas, NV SIU Credit Union, Carbondale, IL Smart Financial Credit Union, Houston, TX South Carolina Federal Credit Union, N. Charleston, SC Southwest Airlines FCU, Dallas, TX Spirit of Alaska FCU, Fairbanks, AK Spokane Teachers Credit Union, Spokane, WA Affiliated Organizations Fannie Mae, Washington, DC Federal Home Loan Bank of Chicago, Chicago, IL FICS, Addison, TX First American, Santa Ana, CA Freddie Mac, McLean, VA Genworth Financial, Raliegh, NC Guild Mortgage, San Diego, CA Intuvo, Santa Cruz, CA Investors Title Company, Glendale, CA Kroll Factual Data, Loveland, CO Law Offices of Morton W. Baird, II P.C., San Antonio, TX LenderLive Network, Inc., Glendale, CO LendingQB, Costa Mesa, CA MERSCorp, Holdings, Inc., Reston, VA MGIC, Milwaukee, WI MIAC Analytics, New York, NY Midwest Loan Services, Inc., Madison, WI Mortgage Harmony Corp., McLean, VA

St. Helens Community Credit Union, St. Helens, OR Stanford Federal Credit Union, Palo Alto, CA Summit Credit Union, Madison, WI Suncoast Credit Union, Tampa, FL Sunmark Federal Credit Union, Latham, NY Teachers Credit Union, South Bend, IN Technology Credit Union, San Jose, CA Tennessee Valley Federal Credit Union, Chattanooga, TN Texas Dow Employees Credit Union, Lake Jackson, TX Three Rivers FCU, Ft. Wayne, IN Tinker Credit Union, Tinker AFB, OK Tower Federal Credit Union, Laurel, MD Town and Country Credit Union, Minot, ND Travis Credit Union, Vacaville, CA Tropical Financial Credit Union, Miramar, FL Tru Home Solutions, Lenexa, KS TruChoice FCU, Portland, ME Truity Federal Credit Union, Bartlesville, OK Truliant Federal Credit Union, Winston-Salem, NC Tulsa Federal Credit Union, Tulsa, OK Twin Star Credit Union, Lacey, WA Uncle Credit Union, Livermore, CA United Heritage Credit Union, Austin, TX United Nations Federal Credit Union, Long Island City, NY Unitus Community Credit Union, Portland, OR University FCU RE Services, Austin, TX University Federal Credit Union, Austin, TX University of Iowa Community CU, Iowa City, IA University of VA Community CU, Charlottsville, VA URW Community FCU, Danville, VA USC Credit Union, Los Angeles, CA USF Federal Credit Union, Tampa, FL UW Credit Union, Madison, WI Vantage West Credit Union, Tucson, AZ Veridian Credit Union, Waterloo, IA Virginia Credit Union, Inc., Richmond, VA Vystar Credit Union, Jacksonville, FL Washington State ECU, Olympia, WA Weokie Credit Union, Oklahoma City, OK Westconsin Credit Union, Menomonie, WI Westerra Credit Union, Denver, CO Whatcom Educational Credit Union, Bellingham, WA Wright-Patt Credit Union, Beavercreek, OH Xceed Federal Credit Union, El Segundo, CA MortgageFlex Systems, Inc., Jacksonville, FL National Closing Solutions, Roseville, CA National Mortgage Insurance Co., Emeryville, CA Optimalblue, Plano, TX PHH Mortgage, Mt. Laurel, NJ Prime Alliance Servicing by Cenlar, Ewing, NJ Quicken Loans Mortgage Services, Charlotte, NC Radian Guaranty Inc., Philadelphia, PA Secondary Marketing Resources, Wellesley, MA SWBC, San Antonio, TX The Property Sciences Group, Pleasant Hill, CA The Quality Control Center, West Palm Beach, FL The Stone Hill Group, Atlanta, GA United Guaranty/AIG, Greensboro, NC Urban Lending Solutions, Inc., Broomfield, CO Value Check, Highlands Ranch, CO vanWagenen Financial Services, Eden Prairie, MN Veros, Santa Ana, CA

ACUMA MEMBERInsights Benefit Discounted/Priority Registration In the pipeline: and observations on CU mortgage lending

2015 ACUMA Real Estate Lending Workshops Why Should You Attend? The mortgage lending world is continuing to evolve. And the pace is quickening. To stay on top of developments requires tons of information to be processed from diverse areas. Attending one of ACUMA’s Real Estate Lending Workshops will arm you with the latest information on all relevant fronts—purchase money strategies, regulatory/compliance changes, and operational best practices. We’ll bring you face-to-face with top industry experts for panel discussions and featured speakers sharing in-depth information on the topics that are important to you.

You’ll have a chance to ask questions and get the best advice for your credit union or CUSO, helping you offer new and existing members the best mortgage options in your own market. Can you afford not to attend one of these ACUMA workshop in 2015? We’ll bring together the important topics and experts—providing a high value education in just two days. Make plans now to participate and apply the knowledge gained to your own operation.

May 20-21 Hilton San Francisco Union Square San Francisco, CA

June 30 – July 1 The Westin Copley Place Boston, MA

18 PIPELINE - January 2015

In the pipeline: Insights and observations on CU mortgage lending

Program Highlights This year’s workshops bring together some of the best credit union leaders and industry experts for focused discussions on the real estate lending topics you want to know more about.

Going Beyond the Regulations Amanda Phillips, Accenture

This program goes well beyond the regulations. We will explore the operational and business model impact of the CFPB’s current regs as well as those yet to be in effect. Our focus will be on how to be compliant while developing best practices for efficiency and member satisfaction. We know that it’s not easy! We’ll also have a bonus segment! “When is an application an application?” Reg’s B, C, X and Z all have their own definitions of what is an “application” and what the proper course of action is for HMDA, Adverse Action, Disclosures etc. This bonus segment will help unravel one of mortgage banking’s muddiest mysteries and make sure you’re not caught at audit time!

Taking the Mystery out of the FHLB David Feldhaus, FHLB

This session will show you what the FHLB can do to support your real estate lending strategy. We know it’s confusing, not all the banks operate with the same products and services. We’ll show you how they function as a GSE, an investor, a lender and a partner. No matter where you are we’ll give you a road map to their membership requirements and solutions.

The Westin Copley Place, Boston, MA

Servicer Oversight John Burnett - San Francisco / Shuaib Hassan - Boston, Phoenix Collateral Advisors ( Are you worried that you have all your bases covered and are complying with the GSE’s and the CFPB? Are you using a sub-servicer and worry you aren’t “overseeing” everything you should be watching? Do you fear a servicing audit? This educational seminar will show you what the difference is between auditing and oversight. We’ll review the oversight requirements to remain in regulatory compliance while maximizing servicing performance and ROI.

The Ten Biggest Mistakes Loan Officers make? Brian Sacks

We’ll show you the answers and give you a chance to stump one of the Top LO’s with your toughest Realtor objections, Member challenges and so on. We’ll put this “Top Gun” LO in the hot seat and you’ll learn from a pro!

Hilton San Francisco Union Square, San Francisco, CA

Visit acumacommunity.org/workshop/ for details January 2015 - PIPELINE 19

Feature Article

Millennials: Challenge and Opportunity by Ann Clurman and Rob Callender

20 PIPELINE - January 2015

Millennials: Challenge and Opportunity

78% of Millennials agree: “These days, you don’t need to own a home to have a good life.” You only have to read the

Source: The Futures Company

headlines to know that

the worst economic downturn in more than seven decades disproportionately affected Millennials. The effects are oft-repeated and a bit ominous: This is a group of late starters and inexperienced entry-level employees hamstrung by a dearth of jobs during the downturn. As signs point to renewed economic vigor in the broader economy, these individuals remain far more likely to be unemployed, underemployed and loaded with debt than any other generation.

Many Millenials are “starting slowly and earning less, often taking jobs for low pay or accepting unpaid internships just to get a foot in the door. One-third are living with parents or are financially dependent on them. (Source: usatoday.com, 3.14) January 2015 - PIPELINE 21

Cooportunity

noun [koh-op-er-too-ni-tee]

A favorable time or occasion when all parties involved in the mortgage process experience success.

As a CUSO, myCUmortgage shares the Credit Union philosophy. We understand that when credit unions work through a collaborative cooperative, it creates a winning environment for everyone. You’ll benefit from increased member savings, expanded product offerings (FHA and VA loans) and credit union profitablility... just to name a few.

Redefining your mortgage experience. Find out how we help make Credit Unions GREAT real estate lenders!

877-912-8009 | www.myCUmortgage.com

Millennials: Challenge and Opportunity

Still, all the pundit doomsaying so usinesses everywhere are strugprevalent in discussions about this genergling to understand what role Milation misses an important reality: Generalennials play in their mid- to longtions typically build on their predecessors’ term strategies. It’s a particularly discoveries and advances. In particular, vexing question for bankers, given Millennials tended to be shrewder, more that Millennials, at present, aren’t “easy confident consumers than Gen Xers of money” for the financial services sector. the same age. And the younger cohort’s As we’ll discuss within this report, Millenmarket savvy seems to have extended nials remain financially constrained and beyond simple purchase transactions. not a little wary of the financial system’s While it’s popular to bemoan Millennials machinations. They tend to be less interas a drifting, listless, instant-gratification ested in old-line banking standbys such generation, a study by the St. Louis Fed as brick-and-mortar branches staffed by pokes some holes in that stereotype. (For tellers, often preferring mobile solutions those unwilling to wade through 26 pages that many organizations are only now beof Fed-speak, The Atlantic has a shorter, ginning to prioritize. These problems are more accessible distillation. widespread, but they’re particularly acute In brief, although the study shows that for credit unions. Millennials are less likely than their older Although credit unions could (and peers to own assets such as homes and should) benefit from the recognition that stocks, we view this finding as a natural Source: they’re not like traditional banks, most and expected function of their lifestage Millennials aren’t aware of these distinc(young adults) and not their cohort (MilThe Futures Company tions. Even more problematically, many lennials). In fact, comparing young adults don’t have more than a tangential underin 2013 against those in 1989, the study standing of what it means to belong to a credit union. That’s finds that significantly more Millennial young adults own their a problem, but perhaps not an insurmountable one. As we’ll own home or an investment account—such as a 401(k) or an discuss extensively in this article, Millennials are open—even IRA—than did their Boomer/Xer forebears. Likewise, although eager—to reinvent the status quo. If credit unions can posi- young-adult stock ownership was much lower in 2013 than in tion themselves as the natural alternative to a suspect system, 2001, 2013 levels were nonetheless higher than in 1989. they can seize the mantle of disruptive innovator rather than And while net worth (in 2013 dollars) declined from 1989 also-ran. to 2013, levels of credit-card and automobile debt declined, as well. We see this as an encouraging sign that Millennials are responding rationally to their present reality and positioning themselves for the future. Millennials’ attitudes have shifted broadly as they respond The finding that young-adult homeownership is higher than to a reality that’s substantially at odds with the one they were in 1989 feels especially counterintuitive given all the handraised to expect. For example, while homeownership is still an wringing over Millennial ownership rates. And it’s true that aspiration for many Millennials, it is by no means the perva- many Millennials are single and childless, so owning a home sive and collective dream characteristic of previous genera- (while perhaps vaguely aspirational in some way) is not meantions. Lack of funds (as we will see later) is only one player ingful to them as a place to raise a family. More young people shaping this mindset. Lifestyle preferences, personal lifestage than ever before feel they can live without home ownership: timetables, new notions of success and more, all play a role in They just don’t need it right now, and as they learn to live withmaking home ownership less relevant at this time in their lives. out a home, it’s possible many will never come to see it as a

61% of Millennials say “it’s your responsibility to stand up for beliefs even if they are unpopular.”

Revision and Reinvention

“Compared with young adults in 1989, young adults in 2013 were more likely to own homes, stocks, and retirement accounts. Moreover, young adults in 2013 were less likely to have high debt payment burdens than older adults, young adults in 1989, and young adults in 2001,” the study found. And the median value of bank accounts, retirement portfolios, and stocks held by young Americans were equal or higher than the value of the same holdings for young Americans in 1989.” (The Atlantic) January 2015 - PIPELINE 23

Millennials: Challenge and Opportunity

must-have priority. However, barring continued or increased job insecurity or financial instability, we expect many Millennials to take more concrete steps toward homeownership in coming years. In fact, 80 percent of Millennial homeowners also feel that owning a home is one of their proudest accomplishments. (Source: The Futures Company) Like it or not, Millennials are the future. It’s up to you to begin to understand this cohort – and to Source: make your best case to them. Insights The Futures Company and timely perspectives on a generation’ thinking can help ensure that businesses are not operating under a set of incomplete or outdated assumptions as they

67% of Millennials agree “nowadays we are free to shape our own identities and transform ourselves in any way we want.”

cultivate consumers in their marketing communications and product and service offerings. Generation matters.

Generation Matters

A generation is a group of people who grew up and came of age together, linked through the shared life experiences of their formative years. Economic conditions, pop culture, world events, politics, technology, heroes and villains, are all examples of collective experiences that set the tone for a generation, give it direction, provide it with a sense of what’s possible, what’s valuable and what life skills are needed. While there will be a diversity of opinions in any group, a generational cohort will show a distinctive mix of core attitudes and values that affect everything from saving and spending orientation to career choice and work style to media and communication behaviors, etc. Businesses whose core constituency is defined at least in part by lifestage or living situation must recognize and respond to “generational change-overs”; age alone does not provide insights as to how consumers choose to fulfill the needs and necessities of lifestage. Generation does. Most Matures lived at home until marriage. Boomers added a stop along the way between childhood home and married home, flocking to apartment living and roommates (not to mention orange crates-asbookcases!). Today, Millennials continue to upend traditional lifestage-based assumptions about rites of passage and all sorts of ownership aspirations.

SIDEBAR: The generations with birth years and pics

Figure 1

Matures: 1945 and prior Defining the generations Matures: Baby Boomers: 1946-1964

1945 and prior Each generation Generation X: 1965-1978 has a broad brush Baby Boomers: personality that brings 1946-1964 Millennials: 1979-1996 different priorities, perceptions, talents Generation X: and styles Centennials: to the 1965-1978 1997-present societal conditions Millennials: common to all cohorts. 1979-1996 These acculturation biases withstand the Centennials: test of time. Meet the Millennials 1997-present

Quick Facts 24 PIPELINE - January 2015

According to the U.S. Census Bureau’s Statistical Abstract of th

Millennials: Challenge and Opportunity

Meet the Millennials Quick Facts n According to the U.S. Census Bureau’s Statistical Abstract of the United States: 2012, just over 69 million babies were born between 1979 and 1996. Although this population rate put them second to Baby Boomers in terms of generation size, the aging Boomer cohort will imminently make way for Millennials’ emergence as the most economically and culturally important cohort in the United States. n 42% are married or part of an unmarried couple living together; 55% have never been married n 36% are parents (compared to 78% of Xers, 79% of Boomers) n Millennials are the last majority Non-Hispanic White generation, 41% of Millennials are Hispanic, African American, or Asian American

Bubble, Bubble, Bust and Struggle

The formative experience of the Millennial generation has been one of ups and downs, highs and lows, leaps forward and big stumbles backward. This generation grew up through two bubbles, two busts, two wars and two centuries. They see new possibilities, new approaches to success and new ways of living that are seemingly arriving daily. Globalization and cultural diversity have created a cross-pollination of ideas that they are eager to soak up.

Drilling Down: A Values Roadmap

Capturing the marketplace potential of Millennials requires an up-to-date understanding of the unique characteristics and qualities the generation brings to lifestyle choices and marketplace decisions.

An experience of authorship: Emboldened by a keen sense of importance (both at the individual and generational levels) and an unprecedented level of technology-proficiency, Millennials have always been invested in defining their own dreams, inventing their own solutions

and asserting their will in the marketplace. Remember, the generation-defining individualism of Baby Boomers has hardly waned and Boomers, in turn, have not raised their Millennial children to be any less individualistic. In fact, Millennials grew up in a world of unprecedented self-invention, a world in which they have had the power and control needed to participate in the creation (and the meaning) of all sorts of options—from blogging, to creating your own running shoes to voting someone “off the island.”

67% of Millennials say it is important that others see them as someone who can always see through exaggeration and hype. Source: The Futures Company

A demand for authenticity: Millennials prize and practice being true to themselves— and they are happy to let others be true to themselves as well. Millennials appreciate clarity and take pride in their ability to see through hype and exaggeration.

Expectations of autonomy: Millennials relish independence, express comfort with doing things ‘my own way,’ regardless of how others approach life, and are more likely to try new things. Millennials’ individuality coexists alongside a powerful team ethos characteristic of this generation. Millennials are just fine standing out within the crowd.

It’s often a matter of what we call “Immediascene™-- large proportions of Millennials report exploiting their smartphones in retail settings. This opinion dominion creates a sense among Millennials that “I’m always everywhere with everyone,” fueling a belief that their purchases—blessed by friends and fellow shoppers—are both savvy and socially secure.

January 2015 - PIPELINE 25

Millennials: Challenge and Opportunity

Little appreciation for custom and convention: Social conventions and hierarchies have little intrinsic value to Millennials. This is perhaps most visible in the way Millennials approach their journey through life: the Millennial trajectory through life is by desire and will, rather than adherence to traditional linear life stages. Greater flexibility in expectations and life choices with fewer constraints on personal identity means that many Millennials are rejecting pre-designed and narrowly defined Source: roadmaps to their future, with many The Futures Company delaying their transition into the typical notion of adulthood. As discussed earlier, Millennial priorities are—at least presently—depressing homeownership numbers. This is a tangible marketplace expression of Millennials’ reluctance to blindly

Millennials: Prefer a life that’s exciting but not secure or stable: 35% Prefer a life that’s secure and stable but not exciting: 65%

follow established conventions. Two long-term trends, both growing for decades and now at unprecedented levels among young people today, are pushing hard against Millennials becoming homeowners. Simply put, my-life-my-way Millennials aren’t facing the same lifestyle needs as prior generations at their age. One of these trends is the age of first marriage: young people today are not only marrying later, they at marrying at record later ages. The average age of first marriage has been rising ever since it bottomed out with Baby Boomers who married in their very early twenties. In fact, only 26 percent of 18- to 32-year-olds are married today, compared to 48 percent back in 1980 when the Boomers were that age. The other of these two long-term trends is the age at which women first have children. As with marriage, it is at a later age than ever—just shy of 26 years old today, and first births among women in their late thirties and early forties are on an upward trend and are occurring in record numbers.

Passion points: Believing “stuff weighs you down,” many Millennials are more drawn to contentedness “my way” than they are to cash, cars and castles. Under Millennials’ watch, cars went from an avatar of youthful freedom to a costly burden. Technology is a well-known passion point for the Millennials. As digital trailblazers, Millennials grew up using technology fluidly and fluently. Millennials made the digital world their own, they mapped it and they helped establish the rules. It’s not an exaggeration to say that technology is the new status symbol for many Millennials, replacing such bedrock aspects of life as clothes and automobiles. In fact, as John Morris, a retail analyst at BMO Capital Markets lamented about the falling demand for clothes, “You try to get them talking about what’s the next look, what they’re excited about purchasing in

narrowly defined roadmaps to their future, with many delaying their transition into the typical notion of adulthood.

Figure 2

a less structured path through life

26 PIPELINE - January 2015

Millennials: Challenge and Opportunity

apparel, and the conversation always circles back to the iPhone 6,” he said. “You get them talking about crop tops, you get a nice little debate about high-waist going, but the conversation keeps shifting back.”

Among Millennials I could not get by without my cellphone/smartphone

62%

I would like to be able to make payments by scanning my smartphone

52%

I would rather communicate via text message than talk on my cell phone/smartphone

56%

Interested in a wearable device that records video of your every waking moment

45%

Looking at digital uptake within financial services, the chart below shows that young, high-net-worth investors often prefer digital to direct contact with their advisors.

High Net Worth Individuals* Worldwide Who Prefer Direct vs. Digital Interaction with Wealth Managers, by Age, March 2013 % of respondents in each group <40 29.1% 20.2% 40-49 24.8% 24.0% 50-59 22.9% 32% 60-69 21.7% 38.2% Total 23.7% 30.7%  Digital contact

 Direct contact

Note: top-3 box on a 10-point scale; *with $1+ million in investable assets Source: Acpgermini and RBC Wealth Management, 2013 WorldWealth Report, June 5, 2013 168595

www.emarketer.com

A new reality: Confidence tempered by reality and hardship: Shaped by Boomer (aka helicopter) parents and an education system obsessed with protecting, guiding and instilling self-esteem, Millennials grew up extremely ambitious, with an unshakeable confidence that they would get where they wanted to go quickly and easily thanks to the various personal strengths that made them each unique and special. Now, careening from the longest peacetime economic expansion in history to the worst economic downturn in seventyfive years, pummeled by a challenging job market, and faced with ongoing changes to the fabric of society, the way Millennials look at life has been fundamentally altered. Their overconfidence has been forcibly removed, their sanguine sense of security has morphed into a heightened awareness of risk, their youthful boldness has mellowed into an outlook that has dialed down the daring and keyed up the caution. Even as the economy continues to improve, this altered mindset still prevails. Asked whether they’d prefer a life of dull stability or exciting volatility, more Millennials say they’re content with a happy humdrum.

Stressed and self-aware: Stress continues to come at people of all ages from all directions. The average person is confounded by negative as well as positive triggers: they’re bombarded by choices yet intrigued by options, too many to-dos, too little trust. Stress, of course, is a risk factor for both anxiety and depression, leading to a new urgency inspiring more conversation about—and response to—mental illnesses and disorders. Millennials are by no means immune from rising emotional and mental health problems. The American Psychological Association’s “Stress in America” report found that the gap between adults who say stress management is important and those who say they manage their stress effectively is widest among Millennials. Nineteen percent of Millennials say they have been told they’re suffering from depression, compared to 12% of Boomers and 11% of Matures. (Source: The American Psychological Association, 2013). And In the fall of 2010, the annual UCLA Freshman Study found an all-time low of 52% rated their emotional health in either ‘the highest 10 percent or ‘above average.’” (Source: The Freshman Study, conducted annually since 1966 by the Higher Education Research Institute at UCLA)

“There’s a lot of evidence that millennials don’t drive as much—or care as much for cars in general—as previous generations their own age did. They’re less likely to get driver’s licenses. They tend to take fewer car trips, and when they do, those trips are shorter. They’re also more likely than older generations to get around by alternative means: by foot, by bike, or by transit.” (Source: washingtonpost.com/blogs, 2014) January 2015 - PIPELINE 27

Millennials: Challenge and Opportunity

Success recalibrated: In the face of newfound difficulties and a road ahead that was clearly less straightforward than they’d been led to expect, Millennials did not flounder long. Rather, they gathered their wits and began tackling the uncertainty they faced. In true Millennial fashion, the transformation was quick and dramatic. A generation regrouped with a new mantra: Don’t abandon expectations for success; cope and reconstruct. Success by coping is about succeeding by trying; what constitutes success is effort, perseverance and adaptability, rather than fortune. In other words, grit, not get; playing the game is more significant than winning or losing. Success by reconstructing is about measuring happiness less by its market Source: value and more by the The Futures Company meaning behind it. Be creative: play the hand you are dealt to make something that fits your lifestyle. Be adaptable: never forget that flexibility trumps planning in an uncertain world. Significantly, as they worked through revising their expectations, Millennials set about paying down revolving debt at rate no one thought possible. In fact, today debt is now a major factor shaping Millennials’ view of success.

60% of Millennials say being debt free: is a sign of success and accomplishment. 43% of Millennials say they are “very/fairly” worried about getting out of debt. 39% of Millennials say their debt level is ruining the quality of their life.

“Earlier” financial savvy: “A January 2014 survey of U.S. investors by UBS Wealth Management found that Millennials’ risk tolerance was more closely aligned with seniors who lived through the Great Depression than Gen X or Boomer generations.” (eMarketer, February 2014, Digital Investors: Drawing From a Portfolio of Growing Online and Mobile Options) Today, more consumers are feeling an urgent need to build financial capabilities from a younger age. Needless to say, young people have shifted their financial expectations and strategies based on what they saw happen during the Great Recession and its aftermath. We can expect this to translate to a proactive approach to retirement planning and saving. Ann Clurman is an Executive Vice-President at The Futures Company. Described by US News and World Report magazine as “one of the best researchers and generation-watchers,” Ann is a nationally recognized authority and lecturer on American consumers. She is the co-author of Generation Ageless: How Baby Boomers Are Changing the Way We Live Today…And They’re Just Getting Started (2007) and Rocking the Ages, The Yankelovich Report on Generational Marketing (1997). Ann is also coauthor of Coming to Concurrence: Addressable Attitudes and the New Model for Marketing Productivity (2004), excerpts of which have been published in BrandWeek and DIRECT. Rob Callender is Director of Youth Insights for The Futures Company and, in that capacity, serves as the company’s Youth Global Knowledge Lead. During Rob’s 15 years at The Futures Company, he’s appeared in such news outlets as the Associated Press, Mashable, USA Today, NPR, the Wall Street Journal, CNN, Hollywood Reporter and Billboard, among others.

About The Futures Company The Futures Company is an award-winning, global strategic insight and innovation consultancy. Unparalleled global expertise in foresight and futures enables The Futures Company to unlock new sources of growth through a range of subscription services and research and consulting solutions. The Futures Company was formed through the integration of The Henley Centre, HeadlightVision, Yankelovich and most recently, TRU. The Futures Company is a Kantar company within WPP with teams in Europe, North America, Latin America and Asia. www.thefuturescompany.com Follow The Futures Company on Twitter @FuturesCo and Facebook.

What matters most on the dating scene today? According to The New York Times, an increasing number of daters today are placing priority not on looks, shared interests or intention of starting a family, but on the prospective partner’s credit score. Sites like www.creditscoredating.com give prospective dates insight into “the only grade that matters after you graduate.” (Source: The New York Times, 12.12) 28 PIPELINE - January 2015

Millennials: Challenge and Opportunity

A Millennial Guide to Life Developing winning strategies around Millennials requires understanding their expectations, ambitions and life skills. Hereâ&#x20AC;&#x2122;s a sum-up to get you on your way.

MILLENNIALSâ&#x20AC;Ś.. Expect to live their lives in constant, even relentless transition, defined by technology and connections Relish the possibility of and satisfaction of reimagining everything Are determined to live life on their own terms and timeframes, often ignoring traditional milestones (e.g., home ownership) Know the future will be challenging and that they will have to work harder to succeed than ever before Appreciate the virtue of having a back-up plan for inevitable glitches and setbacks View debt as a paramount factor in their personal sense of accomplishment Need flexibility and the ability to co-create from the marketplace Are accustomed to a heightened state of security and risk Expect to have conversations with brands, often in real time Value brands and institutions that stay true to their essence Evaluate organizations on their degree of authenticity, integrity, and good corporate citizenship

January 2015 - PIPELINE 29

Feature Article

30 PIPELINE - January 2015

U.S. Macro Outlook 2015

U.S. Macro Outlook 2015:

Spirits Unleashed By Mark Zandi

Moody’s Analytics U.S. Macro Forecast for 2015 n Growth should accelerate in 2015 as higher wages spur more spending, construction and investment. n The sharp fall in oil prices will slow energy production but still be a net gain for the economy. n How fast the Federal Reserve raises interest rates, and how markets respond when they do, will be key to the coming year’s economic story. n As more millennials begin forming households, housing demand and construction will take off. n The aging population and a slower pace of technological change could weigh on the economy’s long-term potential. n Problems in Europe and China have the potential to hinder the U.S. expansion in 2015. January 2015 - PIPELINE 31

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U.S. Macro Outlook 2015

The U.S. is also vulnerable n general, 2014 was a good year for the U.S. economy, to a softer global economy. With and 2015 should be even better. the euro zone and Japan flirtThe most encouraging development of the past year ing with recession, and China’s was the rapid decline in joblessness. At the current pace growth steadily throttling back, of job growth, the economy is fast approaching full em- the U.S. trade situation will ployment. The next critical step in the economy’s return to full erode. This will be made worse health is a meaningful acceleration in wage growth, which ap- by the recent surge in the value pears imminent. of the dollar, which is sure to Most surprising has been the recent slide in oil prices, which, continue. If conditions don’t get if sustained, will provide a significant boost to growth. The U.S. any worse overseas, the U.S. reproduces a lot more oil than it used to because of the shale revo- covery should hold firm. This is lution, and falling prices will take a toll on future energy develop- a big if. ment, but the country is still a significant net consumer of oil. As U.S. Macro Forecast consumers put. less of what they earn into their gasoline tanks, therefore, the holiday shopping will receive a lift. Arguably the biggest disappointment in 2014 was the The other developing conerate in 2015 ashousing highermarket. wages spur spending, sideways The surgemore in mortgage rates inconstruction late cern is theand U.S. investment. economy’s weak 2013 and tight mortgage credit hurt home sales and construc- potential growth rate. Underlyices willtion. slowButenergy production but still be a net gain for the economy. mortgage rates have receded and the credit spigot ing labor-force and productivity beguninterest to open. Many who have delayed form- when growththey remains weakness willyear's help re-economic Reservehas raises rates,millennials and how markets respond do,disappointing. will be keyTheir to the coming ing households will begin to do so soon as the job market im- turn the economy to full employment more quickly, but if they proves, moreover, making housing a more significant source do not improve growth will be weaker over the longer term. A of growth. persistently low rate egin forming households, housing demand and construction will take off.of new business formation, which is the fodder for innovation and productivity gains, adds to worries. it is premature to conclude that the economy’s n and a slower pace of technological change could weigh onHowever, the economy's - term long potential. supply side won’t come back to life as full employment apnd China have the potential to hinder the U.S. expansion in 2015.The U.S. has a surfeit of potential workers who This highlights a key threat to the economy in the coming proaches. year; namely, the chance that the Federal Reserve will begin to stepped out of the job market during the tough times; some of raise interest rates. The Fed needs to engineer short- and long- them will step back in as wage growth and job opportunities d year for the U.S. economy, shouldjobbe eveninbetter. term rates higher, consistentand with 2015 the improving market, return. Business formation and investment should also recover a way that keeps the housing recovery on track. Policymakers as the psychological shadow of the Great Recession fades and have all the tools they need and have gained valuable experi- risk-taking revives. elopment past yearwith wasfinancial the rapid decline in joblessness. At the current pace of job growth, the economy is enceof inthe communicating markets. Yetnext the process of normalizing monetary mayto not be health is a meaningful acceleration in wage growth, oyment. The critical step in the economy ’spolicy return full as graceful as we hope. A key missing ingredient to a stronger economy has been real wage growth. Despite the increasingly robust job creation, the econFigure 1 Better Economic Times Ahead omy is still climbing out of the deep hole created by the Great Recession. Unemployment and underemployment are now falling fast, % but there is still slack in the labor market equal 4 10 to approximately 1.25% of the labor force.  Unemployment rate (R) ▪▪▪▪ Real GDP growth (L) At the current underlying pace of job 9 growth—about 225,000 per month—this slack will be absorbed by mid-2016, assuming stable 3 8 labor force participation. If participation picks 7 up as disenfranchised workers come back into the labor force, the economy will return to full 2 6 employment by the end of 2016. Although full employment is still some 5 distance away, wage growth should soon pick up. Data indicate it already has begun to do 1 4 so. For much of the recovery, wages have 10 11 12 13 14 15F 16F 17F 18F 19F 20F grown only about 2% per year, the rate of Sources: FDIC, Moody’s Analytics inflation. This means workers have not been

ok 2015: Spirits Unleashed

Weaker potential

Apartment construction is already the bright spot in the housing market, and it is sure to get brighter.

The Fed factor

Wage resurrection

January 2015 - PIPELINE 33

entist

slack in the labor market equal to approximately 1.25% of the labor force.

At the current underlying pace of job growth —about 225,000 per month —this slack will be absorbed by mid -2 force participation. If participation picks up as disenfranchised workers come back into the labor force, U.S. Macro Outlook 2015 employment by the end of 2016.

Although full employment is still some distance away, wage growth should soon pick up. Data indicate much of the recovery, wages have grown only about 2% per year, the rate of inflation. This means wor increases in productivity, and is why the profit share of national income has risen to a record high. rewarded for increases in productivity, and is why the profit share of national income has risen to a record high. As the economy reaches full employment, pay should grow fast enough to cover both inflation and productivity gains. Assuming underlying productivity growth is near 1.5% per year, nominal annual wage growth should steadily accelerate to 3.5% over the next two years.

Figure 2

Wage Growth set to Accelerate

2001 Q1 to current 4.0 3.5 3.0

Y-axis=Employment cost index private wage and salary, % change yr. ago, 2-qtr lead

Current ook good. Wages as measured by data from human - resource company ADP tell an even more positive story. 2.5

Spend versus save

2.0 Evidence is mounting that this anticipatge growth will supportedstronger consumer ’t save donit all. Given the wealth effects powered by acceleration has begun. spending Wage growthas aslong as consumers X-axis=Unemployed 1.5 measured by thesaving employment index, the k prices and better housing values, ratescost should, if anything, per decline. Easier job opening, # credit and more relaxed consumer attitudes most comprehensive and consistent measure 1.0 owing also point to lower saving and greater spending. of compensation, hit bottom at 1.5% three 0 1 2 3 4 5 6 7 years ago. Growth is now definitively above

BLS, Moody’s Analytics 2%, and thesentiment. trend lines look good. Wages as es should also boost consumer Perceptions aboutSources: the economy have been lackluster despite the better job marke measured by data from human-resource comudge the economy based is rising and could whether ’smore average year payofincrease consumers mean this purchases big-ticket was items panyon ADPwhether tell an eventheir morepay positive story. faster than inflation, such as vehicles, whose sales are already back to prerecession Stronger wageuntil growth will Improved support stronger consumer last year ’s. This has not been the case now. moods among consumers could mean more purchases - ticket of big spending as long as consumers don’t save it all. Given the levels because of lower gas prices and easy credit. Next could as vehicles, whose saleswealth arethe already backreaches to prerecession levels because of lower gasfast prices and easy credit. Next could be As economy full employment, pay should grow enough to cover both inflation andhous pro effects powered by record stock prices and better hous- be houses, sales of which have been flat since mortgage rates jumped more than a year ago. ch have been flat sinceing mortgage rates jumped more than a year, yearEasier ago. productivity growth is near 1.5% per nominal annual wage growth should steadily accelerate to 3 values, saving rates should, if anything, decline.

credit and more relaxed consumer attitudes toward borrowing also point to lower saving and greater spending. prise Spend savealso boost consumer sentiment. PerHigherversus wages should Further boosting both consumer spirits and the economy’s ceptions about the economy have been lackluster despite the better job market. Americans judge the economy based on prospects is the surprising slide in oil prices. At near $60 per sting both consumer spirits and economy ’s prospects isanticipated the surprising slide incrude oilhas prices. At near per barrel, crude prices Evidence ispay mounting that this acceleration begun. Wage growth as measured barrel, prices have fallen$60 about 40% since summer. Ifby the e whether theirthe is rising faster than inflation, and whether sustained, lower prices will lift global real GDP growth rates this average pay increase was will bigger last of year’s. about 40% since summer. Ifyear’s sustained, lower prices liftthan global real GDP growth hit rates in 2015 more than halfago. a percentag comprehensive and consistent measure compensation, bottom at by 1.5% three years Growth in 2015 by more than half a percentage point, and just under ust under that in the U.S.This has not been the case until now. Improved moods among MOODY'S ANALYTICS / Dismal Scientist / Copyright© 2014 / www.dismal.com that in the U.S. Saudi Arabia is crucial to where oil prices Figure 3 Global Economy are headed next. The Saudis’ decision not to gets an Energy Boost scale back production to offset supply growth in the U.S. and elsewhere was the proximate cause for the plunge in prices. Softer global % change in 2015 real GDP due to lower oil prices demand growth and a robust dollar also contributed, but if Saudi Arabia had reined India in production as it has in times past, prices Turkey would have held firm. Japan The Saudis appear to believe that the China global surfeit of oil is here to stay and the burEuro zone den of balancing supply and demand must be Global shared more broadly. They can financially abU.S. Based on WTI of $70 sorb the fall in revenue, at least for a while, U.K. per barrel in 2015 given the savings they built when prices were Canada high. A lower global oil price also likely fits Norway their geopolitical strategy. Saudi Arabia’s adRussia versaries—Iran, Russia, and the insurgency -1.2 -1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 calling itself the Islamic State—are all sufferSource: Moody’s Analytics ing badly from the lower prices.

Energy surprise

34 PIPELINE - January 2015

a is crucial to where oil prices are headed next. The Saudis ’ decision not to scale back production to offset supply growth in the

U.S. Macro Outlook 2015

Bottom of the barrel?

Tight mortgage credit combined with a previous jump in We believe oil is close to a bottom, and will slowly climb mortgage rates significantly back to $100 per barrel over the next three years. Lower prices crimped first-time homebuyers. will eventually force cuts in production, mostly where costs are The lack of first-timers makes it high, such as the North Sea and the Arctic, but even investment difficult for trade-up buyers to in low-cost U.S. shale production will weaken. Lower prices sell their homes, ultimately hurtwill also prop up oil demand—possibly faster than expected, ing sales of new homes and sinjudging from a recent surge in sales of gas-guzzling SUVs. gle-family construction. The principal economic beneficiaries of this will be conThis too should change soon. sumers, who will enjoy what amounts to a meaningful tax cut. Mortgage finance giants Fannie In the U.S., this is expected to equal close to $100 billion in Mae and Freddie Mac recently 2015, or 0.6% of income. Global oil-related investment and prosignaled a greater willingness duction will be hurt, but U.S. shale producers, whose average to lend by lowering their minibreak-even cost is closer to $60 per barrel, should do relatively mum down payment requirewelt. On net, the oil price decline is expected to lift U.S. GDP ment from 5% to 3%. They have growth next year by 0.4 percentage point. also relaxed the representations and warranties they require on the loans they buy. This should ease lenders’ about bedisappointing, but that is expected to change in 2015. While homeconcerns sales, construction, prices and rents have Housings recovery has been disappointing, but that is ing forced to buy back loans that to change in 2015. While home construction, housingexpected bust ended three years ago, thesales, market is far from normal, least in terms eventually getat into trouble, thus of sales and construction. prices and rents have come a long way since the housing bust encouraging more new15% lending. now roughly with household incomes, but sales are still almost below what would be considered ended consistent three years ago, the market is far from normal, at least Housing starts are expected to ramp up from just over 1 terms of sales and construction. House prices and rents are are off byinone - third. million units this year to nearly 2 million units in 2017. This now roughly consistent with household incomes, but sales are is much more than the estimated 1.7 million units required to still almost 15% below what would be considered typical, and meet demand in a typical reflects the unleashing of been slow k by a combination of factors. The heretofore tough job market has been hardyear, onand millennials, who have housing starts are off by one-third. pent-up demand by those millennial households. Housing has beenmore held -back by -ayear combination of factors. are more than 3 million to 18 34 34year- olds living with their thanalso there werea prior tojobs. the Theparents increased today construction represents lot more The heretofore tough job market has been hard on millenniAll the current slack in the labor market will be absorbed by enty - andals, early - thirty thirty- somethings form households who have been slow to formwill households. There are moreand move into apartments as the job market tightens. stronger housing construction. thanbright 3 millionspot more in 18 to 34 housing year-olds living with their parents already the the market, and it is sure to get brighter. today than there were prior to the recession. Many of these twenty- and early-thirty-somethings will form households and bined with previous jump in mortgage rates significantly crimped - time first homebuyers. The lack of first - timers movea into apartments as the job market tightens. Apartment Forecasting interest rates is generally foolhardy, but a construction is already the bright spot in the housing market, buyers to sell their homes, ultimately hurting sales of new homes and single - family quickly improving economyconstruction. makes it prudent to prepare for and it is sure to get brighter. higher rates over the next several years. If everything sticks roughly to script, the Federal Mortgage Lending Reserve will normalize short- and long-term Figure 4 Standards Remain Tight rates as the job market tightens. More jobs and stronger wage growth will trump the ill % of originations by vintage of credit score effects of higher rates on the housing market and broader economy. 100 When the economy is healthy, the fed90  700+  660-699  620-659  <620 eral funds rate should be approximately 4% 80 and the 10-year Treasury yield closer to 5%. 70 While much improved from recent years, 60 the U.S. economy is far from healthy. Full 50 employment is still in the distance, infla40 tion remains stubbornly below the Federal 30 Reserve’s target, and the financial system is 20 adjusting to stiffer regulatory requirements 10 and increasingly tough capital and liquid0 ity standards. The Fed’s balance sheet is also 05 06 07 08 09 10 11 12 13 14 bloated with Treasury and mortgage securities following several rounds of quantitative Sources: Equifax, Moody’s Analytics easing. This will put downward pressure on

The most encouraging development of the past year was the rapid decline in joblessness. At the current pace of job growth, the economy is fast approaching full employment.

Hopes for housing

Interest rate risk

January 2015 - PIPELINE 35

U.S. Macro Outlook 2015

entist Figure 5

Slow Exit by the Fed

Assets held outright on the Fed’s balance sheet, $ bil 4,500 Forecast 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 06 07 08 09 1 0 11 12 13 14 15 16 17 18 19 20 21 22 23 Source: Moody’s Analytics

proaches, bond investors may panic again. They may fear that the Fed will be forced to raise short-term rates more aggressively to contain inflation. Housing and the global economy would be hurt, posing a threat to our sanguine outlook. Given the surprising decline in long-term rates this year, it is also worth considering that they may remain lower longer than anticipated. With the Bank of Japan aggressively buying bonds and the European Central Bank likely to step up its own bond purchases, U.S. long-term rates could also be held down. Stiffer bank liquidity requirements, which require large multinational banks to hold larger and more liquid bond portfolios, may also contribute. Lower than expected long-term rates would be a plus for housing and economic growth.

Overseas trouble

long-term rates until these securities mature, which could take The U.S. economy is less sensitive than most to changes in until the 2020s. global conditions, but it isn’t immune. And there is plenty of ests that the Fed ’s normalization interest should occur slowly. Policymakers willWith begin short rates in mid All thisofsuggests thatrates the Fed’s normalization of interest trouble overseas. the raising value of- term the dollar surging, the- U.S. rates should occur slowly. Policymakers will begin raising balance is sure deteriorate. Global es won ’t approach 4% until early 2018. The 10 - year Treasury yield, currentlytrade near 2.25%, won ’to t make it back totrade, 5% which on a to date rates in mid- 2015, but rates won’t approach 4% hasn’t been a factor in the U.S. recovery, will soon become a asis for the foreseeableshort-term future. until early 2018. The 10-year Treasury yield, currently near meaningful drag. 2.25%, won’t make it back to 5% on a consistent basis for the Most worrisome are the euro zone’s travails. The singleforeseeable future.may not follow the’sFed currency region flirting with another recession, its unders are notoriously fickle, and they script. This could be seen in isthe summer of 2013, whenand then - Fed But bond traders are notoriously fickle, and they may not employment is already painfully high. Political fissures are n Bernanke began talking ending QE. could Traders thought Bernanke signaling rise -member term in short rates, and followabout the Fed’s script. This be seen in the summer of was widening in nearlyan all imminent the euro zone’s countries. Eu2013, when then-Fed Chairman Ben Bernanke began talking ro-skeptic political parties with mixed commitments to meetnds. Long - term rates jumped. about ending QE. Traders thought Bernanke was signaling an ing their nations’ debt obligations are gaining strength. If one imminent rise in short-term rates, and they sold bonds. Long- of these parties appears set to gain control of a government, ves term rates jumped. global investors could again question the European resolve to keep the euro zone together. Another round of financial turmoil would ensue.

moved quickly to calm traders ’ nerves, and bondInvestor yields nerves have since receded, but the housing market was hurt badly. Emerging Fed officials moved quickly hat rely on foreign bond investors to fund large current account deficits, such as Brazil, India, South Africa and Turkey, are still to calm traders’ nerves, and bond The ECB steps in Euro-skeptic ith the aftermath of that spike in rates. yields have since receded, but the The European Central Bank is expected to forestall such a

housing market was hurt badly. scenario. The ECB has ramped up its bond-buying program in political parties economies that rely on recent months by purchasing covered bonds and asset-backed larly debilitating surge in long - term rates seemsEmerging less likely given their decline this year, but it’tcan be dismissed. As the economy foreign bond investors to fund securities. This won’t be enough, however, and the ECB will with mixed ull employment, wage growth picks up andlarge the first Fedaccount rate hike approaches, bond investors may panic current deficits, next buy supranational European bonds, suchagain. as thoseThey issuedmay fea commitments such as Brazil, India, South Africa by the European Investment Bank. It will be politically harder will be forced to raise short - term rates more aggressively to contain inflation. Housing and the global economy would be hurt, and Turkey, are still struggling for the ECB to buy individual nations’ sovereign bonds, but it to meeting eat to our sanguine outlook. their with the aftermath of that spike is increasingly likely to do so. While the economic stimulus in rates. won’t be as large as those provided by quantitative easing in nations’ debt Another similarly debilitating the U.S. and U.K., it could still help by lowering the euro’s value prising decline in long - term rates this year, it is surge also worth considering that they may remain lower longer than anticipated. in long-term rates seems and countering deflation fears. obligations are k of Japan aggressively buying bonds and the Central Bank uptoits own purchases, - term U.S. long lessEuropean likely given their decline this likelyItto is astep stretch think the bond ECB’s actions can jump-start the gaining strength. year, but it can’t be dismissed. euro zone economy. That requires broad economic and fiscal liquid lso be held down. Stiffer bank liquidity requirements, which require large multinational banks to hold larger and more As the economy approaches full

reform, particularly in France and Italy. It is also reasonable to

up and the first Fed rate hike ap-

debt crisis. That would be a problem for the U.S.

ios, may also contribute. Lower than expected -long term rates be a plus forthehousing economic employment, wagewould growth picks worry ECB won’tand do enough to head growth. off another European

uble

36 PIPELINE - January 2015

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China China’’s struggles to hit its own economic growth targets poses another threat. Chinese policymakers re structural problems, and have been willing to give up some growth to address them. Most notably, Ch overbuilt, - owned enterprises are unproductive. Corruption U.S. Macro Outlook 2015and speculation has been rampant. Many state degradation epic.

Most disconcerting, leverage has soared in China, comparable to other countries that have suffered sev is held by local governments and financial institutions that have financed the runaway real estate activi

Growth and risk in China

Figure 6

Ominous Echoes in

China’s Debt Growth China’s struggles to hit its own economic growth targets poses another threat. Chinese Gross debt as a % of GDP 5 yrs before financial crisis policymakers recognize they have significant 275 structural problems, and have been willing 13pp 32pp to give up some growth to address them. 250 43pp Most notably, Chinese real estate markets are 225 overbuilt, and speculation has been rampant. 24pp Many state-owned enterprises are unproduc200 38pp tive. Corruption is endemic and environmen175 tal degradation epic. 150 Most disconcerting, leverage has soared in China, comparable to other countries that 125 have suffered severe financial crises. Much 100 of this debt is held by local governments and U.S. U.K. Japan S. Korea China financial institutions that have financed the (2003-07) (2003-07) (1986-90) (1994-98) (2009-13) runaway real estate activity. Each time reform efforts have hit growth Sources: Various government sourcse, Moody’s Analytics too hard, however, Chinese officials have eased up and provided monetary and fiscal stimuli. Most re- timated potential has been a dismal 1.3% per year. This reflects cently, the Chinese central bank surprised financial markets both lackluster labor productivity growth of 1%, and paltry labor by cutting rates. China’s growth slowdown hasn’t been pain- force gains weighed down by falling participation. Each have That hit growth too hard, however, Chinese less, buttime so far reform it has beenefforts well-managed. China’s financial A poor potential growthofficials rate has have allowedeased slack inup theand la- provid system is relatively closed and authorities aresurprised able to quickly bor market to be absorbed morerates. quickly.’China once full employrecently, the Chinese central bank financial markets by cutting sBut growth slowdown hasn ’t change policy has helped. ment is achieved, unless potential picks up, economic growth been well- managed. That China ’s financial system iswill relatively closed andhurt authorities are able to quickly ch slow sharply. This will living standards, particularly for lower-income households, and undermine the government’s precarious fiscal situation. Putin's choices Still, balancing reform and growth isn’t easy, and China’s The fall in potential growth rates was in part anticipated. managers may stumble. It wouldn’t take much of a misstep to The large baby-boom cohort has begun to retire in recent years, undermine already- reform reeling global weak-China reducing labor forcemay participation. More than half the decline Still, balancing andcommodity growth ’isn tmarkets, easy, and ’s managers stumble. It wouldn ’t take much of a m en fragile emerging economies, and upset financial markets. in participation since the recession hit is attributable to retiring reeling globalwouldn’t commodity weaken fragile emerging and upset financial T The U.S. economy survive markets, this storm unscathed. boomers. Some ofeconomies, the slowdown is likely temporary, related markets. to Russia’s economic problems are by themselves not a rea- the recession and its fallout. Fewer job opportunities have also storm unscathed. son to worry, but the pressure they put on Russian President contributed to lower participation and less foreign immigration, Vladimir Putin could be. Sharply lower oil prices, Western eco- which is important to the growth of the working-age population. Russiasanctions ’s economic are by nomic due to problems Russia’s incursion intothemselves Ukraine, and not a reason to worry, but the pressure they put on Russ the collapsing ruble and resulting higher inflation and interest sanctions due to Russia be. Sharply lower oil prices, Western economic ’s incursion into Ukraine, and the colla rates are suffocating Russia’s economy. The government’s fisinflation interest rates are suffocating Russia ’s economy. government situation is also cal situationand is also rapidly eroding. How Putin will respond LaggingThe productivity growth’sisfiscal also probably partly cycli- rapidly to difficult to forecast. It is equally to imagine cal, reflecting dark psychological shadow of theorrecession tothis thisis is difficult to forecast. It iseasy equally easyhim to imagine himthereining in his adventurism ramping it up reining in his adventurism or and uncertainty created by political brinkmanship in Washingimplications for globalramping and U.S. economic growth. it up. His choices could ton. Businesses have been especially nervous, reluctant to use have large implications for global the cash they have built up during the recovery to expand and and U.S. economic growth. fund more investment. Entrepreneurs have also been underWhat ’s the U.S. potential? standably wary about starting businesses. Growth potential is thus expected to revive as the recession fades and full employment approaches. Some signspotential indicate grow As the U.S. economy approaches full employment, attention will shift to the economy ’s weak As the U.S. economy approach- this may be occurring, as labor force participation has stabilized es full employment, attention will/ www.dismal.com over the past year despite continued boomer retirements. ForMOODY'S ANALYTICS / Dismal Scientist / Copyright© 2014 shift to the economy’s weak po- eign immigration should rebound with the better job market, tential growth rate—the pace at and business confidence and investment have recently been which the economy can consis- much better. Over the next five years, potential growth should tently grow without generating rise to 2.25% per year, equal to 0.75% labor force growth plus inflationary pressures. Since the 1.5% productivity growth. Great Recession, the economy’s es-

Putin’s choices

Shadows of the recession

Despite these reasonable concerns, betting against the American economy remains a bad strategy.

38 PIPELINE - January 2015

What’s the U.S. potential?

U.S. Macro Outlook 2015

Structural risks

However, there is a meaningful risk that this is overly optimistic. Structural impediments to labor force and productivity growth may not quickly recede. Workers who stepped out of the job market during the tough times may not return, at least not to the degree hoped for. Their skills and marketability may have eroded so significantly that they are unable to find suitable work. The animal spirits that drive business formation and investment could also remain bottled up. An aging population may prove more of a brake on risk-taking than thought. Entrepreneurs tend to start companies in their thirties, and there is a dearth of thirty-somethings. An even more disconcerting possibility is a downshift in the pace of technological change. Perhaps technologies such as 3D manufacturing, drones and DNA sequencing don’t stack up to the productivity-enhancing power of the internet, which fueled growth in the 1990s and early 2000s.

Don’t bet against the U.S.

Despite these reasonable concerns, betting against the American economy remains a bad strategy. The U.S. has clearly had a difficult run over the past 15 years, and has been scarred by terrorism, wars and technology and housing bubbles. Lower- and middle-income households have seen living standards decline. But the bad times are likely ending. Many of the economic wrongs have been righted. Households have deleveraged, the financial system has recapitalized, and U.S. businesses have reduced their cost structures and are highly competitive. Serious problems remain and politics complicate our ability to address them. But if history is any guide, we will.

About Moody’s Analytics Economic & Consumer Credit Analytics Moody’s Analytics helps capital markets and credit risk management professionals worldwide respond to an evolving marketplace with confidence. Through its team of economists, Moody’s Analytics is a leading independent provider of data, analysis, modeling and forecasts on national and regional economies, financial markets, and credit risk. Moody’s Analytics tracks and analyzes trends in consumer credit and spending, output and income, mortgage activity,

population, central bank behavior, and prices. Our customized models, concise and timely reports, and one of the largest assembled financial, economic and demographic databases support firms and policymakers in strategic planning, product and sales forecasting, credit risk and sensitivity management, and investment research. Our customers include multinational corporations, governments at all levels, central banks and financial regulators, retailers, mutual funds, financial institutions, utilities, residential and commercial real estate firms, insurance companies, and professional investors. Our web and print periodicals and special publications cover every U.S. state and metropolitan area; countries throughout Europe, Asia and the Americas; and the world’s major cities, plus the U.S. housing market and other industries. From our offices in the U.S., the United Kingdom, and Australia, we provide up-to-the-minute reporting and analysis on the world’s major economies. Moody’s Analytics added Economy.com to its portfolio in 2005. Its economics and consumer credit analytics arm is based in West Chester PA, a suburb of Philadelphia, with offices in London, Prague, and Sydney. More information is available at www.economy.com. © 2014. Moody’s Analytics, Inc. and/or its licensors and affiliates (together, Moody’s’). All rights reserved. ALL INFORMA’ ON CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

The next critical step in the economy’s return to full health is a meaningful acceleration in wage growth

All information contained herein is obtained by Moody’s from sources believed by it to be accurate and reliable, Because of the possibility of human and mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. Under no circumstances shall Moody’s have any liability to any person or entity for (a) any iOS,S or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of Moody’s or any of its directors, officers, employees or, agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if Moody’s is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The financial reporting, analysis, projections, observations, and other information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell, or hold any securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH OPINION OR INFORMATION 1S GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

January 2015 - PIPELINE 39

Feature Article

The Intricate Art of Todayâ&#x20AC;&#x2122;s Mortgage Underwriting By Jerry DeMuth

New scoring models, more experienced underwriters and more manual decision making are all part of todayâ&#x20AC;&#x2122;s landscape for underwriters.

40 PIPELINE - January 2015

The Intricate Art of Today’s Mortgage Underwriting

Mortgage underwriting continues to change. Once too loose, then perhaps too tight, it now may be inching back closer to middle ground. n But there’s also little doubt, in most cases, that the underwriting process is being done more thoroughly, with many more steps required of the underwriters themselves. This is especially the case as more underwriting is done at least partly manually. And FICO® scores by themselves are becoming less determinative. January 2015 - PIPELINE 41

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The Intricate Art of Today’s Mortgage Underwriting

“O

ver the last two years, underwriting has definitely changed from what it was five or 10 years ago, with all the QM [qualified mortgage] restrictions [around] the ability to repay. That’s where a lot has happened,’ says Donald J. Frommeyer, a loan originator at Mortgage Services III LLC (MSI), Indianapolis, and chief executive officer and immediate past president of the National Association of Mortgage Brokers (NAMB), Washington, D.C. “But for the most part, I don’t know if underwriting has gotten better or worse-but it’s gotten different,” says Frommeyer. “Now, some lenders spend a lot of time wanting to look more at bank statements, wanting to know more about employment. It’s just a difference in the lender. I still think they’re making good aggressive decisions on underwriting. But they’re all striving for that ability to repay and making sure customers fall within the guidelines.” “Just like anything, there’s a pendulum,” explains Mat Ishbia, vice president, marketing, at Troy, Michigan—based United Wholesale Mortgage. “It [underwriting] was way too loose, and some rules and regulations were put in place and underwriters put some overlays and protective things in place. . . . Now it’s coming back to the middle, where it should be, where it’s a little more reasonable.” Underwriting, with increased emphasis on borrower creditworthiness, often is no longer being left solely to automated underwriting (AU) systems, even when conventional mortgages are being underwritten. There’s increased use of manual underwriting, something that the Federal Housing Administration (FHA) has increasingly pushed, including when Department of Housing and Urban Development—approved (HUDapproved) housing counseling is tapped by FHA borrowers. “Our message to lenders is that they absolutely ought to consider whether a borrower has undergone housing counseling, because everybody knows, and we’ve done studies on thisborrowers that take advantage of housing counseling perform much better than those who do not,” says FHA spokesperson Brian Sullivan in an interview with Mortgage Banking. “From a risk perspective, that’s a good thing,” he says. “However, we wouldn’t go so far as to say that housing counseling in and of itself would overcome financial material deficiencies in a loan application. Whether or not it makes a difference in saying yes or no to these loan applications would be judged on a case-by-case basis, applying our new manual underwriting standards.” Sullivan adds, “Broadly speaking, housing counseling is relevant but it may not necessarily overcome material deficiencies in the application.” “There’s been a lot of sloppy underwriting,” maintains Kyle G. Schultz, vice president of mortgage operations at Irving, Texas—based zIngenuity Inc., which provides contract underwriting, underwriting training, underwriting-hiring advice and other services to smaller lenders. “Underwriters lost their responsibility in the underwriting process. I think that everyone was relying on inputting data into automated underwriting systems without a complete understanding of why they needed to keep validating it.”

WHAT MAKES A GOOD UNDERWRITER?

“From what we’re seeing in terms of underwriter applications, the people we’re coming across who are applying [for jobs] really don’t have the depth of experience we’re looking for. Underwriters who were really just junior underwriters and were only part of the process are the ones kind of getting weeded out,” he says. They may have been called underwriters, but they really were nothing more than “income-verification clerks,” he says. When seeking out underwriters for zIngenuity’s clients, Schultz explains, he seeks candidates with a range of experience with different loan types and different lender types, because “quality is really driven by where people worked and whether they’ve seen lots of different types of loans,” he says. “There’s a stratification process that’s going on,” Schultz says. “Lenders are being more focused on who they’re letting do the more complex work, but at the same time there’s probably a leveraging up with talent and getting poor performers out of the process based on quality results.” In the struggle to find underwriters who have been trained to understand specific types of loans, whether conventional or specialties such as self-employed borrowers, mortgage brokers now look to specific mortgage companies or specific underwriters within a company for placing their loans. “There are certain lenders we know that understand our sophisticated borrowers. They have some flexibility and understand complex borrowers,” says Gloria Schulman, founder of Beverly Hills, California—based CenTek Capital Group, which specializes in jumbo loans to self-employed borrowers. Also, at these firms, she says, “Some underwriters are more sophisticated than others.” And it is to these specific underwriters that CenTek’s loan packages are sent. Frommeyer says he chooses lenders based on what their underwriters do particularly well. “We have certain companies that do VAs [Department of Veterans Affairs loans] really well, certain companies that do FHAs really well and certain companies that do conventional business really well,” he points out, noting that this means underwriters at these companies are experienced at underwriting those loan types. Still other companies and their underwriters are especially good at handling mortgages for first-time homebuyers, which often requires finding alternative credit, he adds. Sending loans to the appropriate companies and their underwriters is a better and more successful option than sending all your loans to the same company, Frommeyer makes clear.

Underwriting, with increased emphasis on borrower creditworthiness, often is no longer being left solely to AU systems, even when conventional mortgages are being underwritten.

January 2015 - PIPELINE 43

The Intricate Art of Today’s Mortgage Underwriting

DIFFERENT APPROACHES FOR DIFFERENT LENDER TYPES

The approaches and methodologies used by underwriters vary by the type of lender, explains Tisha D. Hartman, director of real estate lending at KeyPoint Credit Union, Santa Clara, California, and former senior forensic underwriter at zIngenuity. The most conservative and stringent are the lenders that cater solely to the wholesale market, she says. While they may have a particular investor that has closed out a loan niche for them, the methodology behind the underwriting that goes into each decision is going to be a lot more strict, she explains. At the opposite end of the spectrum, the lenders showing the most flexibility, she says, are the large banks and credit unions that are going to park some of their loans in their portfolios. Schultz says the level of understanding required of underwriters who handle such complex loans as jumbos and those made to self-employed borrowers is “critical and [it] really demands more time and demands a better-quality individual doing that work.” Wells Fargo Home Mortgage, Des Moines, Iowa, recognized the different skill sets required for underwriting complex portfolio loans, 30 percent of which are non-QM, and for underwriting QM agency, FHA and VA loans, when it established separate underwriting teams for each in the third quarter of 2013. “It’s a very separate group of underwriters that underwrite only portfolio loans and are located in only six locations across the country,” says Allyson Knudsen, Wells Fargo’s executive vice president and head of underwriting and production risk management, who is based in Minneapolis. “And we actually have a process where we have a panel review. Loans are brought to the panel to talk about why you would or would not want to put the loan on the balance sheet.” QM teams are also based in those six locations as well as in 11 QM-only underwriting locations, she says, and all their loans are manually underwritten after automated engines provide credit and ratio risk assessments. In having two separate teams, Wells Fargo saw the difficulty of keeping up with the ever-changing underwriting knowledge required of each, even for conventional loans, she explains. “Because agencies change their guidelines every day, those underwriters have to keep up with all the agency changes, and all the FHA and VA changes,” Knudsen says. “So as clarifications, et cetera, are sent out, we want people to be able to absorb all that change. Same thing on the portfolio side: That they have expertise and judgment regarding our policies. In today’s environment, it’s [asking] a lot for somebody to wear multiple hats. We believe we’ll have better execution across both if we separate them out.” The portfolio team has more flexibility in documentation requirements and the judgments they can make on such things

“It’s almost like underwriters and loan officers need to be private investigators today,” says Lane.

44 PIPELINE - January 2015

as child support, alimony and percentage of income available for mortgage payments, Knudsen says.

GOING BEYOND CREDIT SCORES

Underwriting today requires obtaining and understanding more information about borrowers or, as some players describe it, more research and analysis. Wells Fargo Home Mortgage no longer simply takes the middle of the three FICO scores, according to Knudsen. “Today we use credit reports for our lending, and analyze and leverage those credit reports as opposed to just the score,” she explains. “The report tells you some things the score doesn’t. We really looked at lowering our FICOs in a couple areas and then leveraging our underwriters’ expertise to underwrite the credit that’s on the credit report, because there are things you can determine today [about] why a score might be low. We want to make sure we’re making a good decision and extending our credit to creditworthy borrowers even if [that borrower] might have a lower credit score.” KeyPoint Credit Union’s Hartman says that as an underwriter, she has deviated many times from “what would be the standard protocol, because I have a greater understanding of what’s behind the numbers and I can make an argument and present that to the end investor or to the agency and get them to buy off on it because I understand the methodology. So it’s not always just about filling in the box-it’s about really understanding what you’re looking at and how that layers into the rest of the file.” Underwriting, especially manual underwriting, needs to be seen as both a science, with its guidelines and technology, and as an art as you “extract a lot of information about a person’s lifestyle and turn that into something meaningful and then make a business lending decision,” Hartman points out. Whether underwriters are using an automated underwriting system or doing manual underwriting “makes a big difference, because sometimes something doesn’t make sense on paper but when you get the story, it does [make sense],” says Sharmen Lane, director of education and a senior underwriting instructor at Loan Officer School, New York. “It’s almost like underwriters and loan officers need to be private investigators today,” says Lane. “It’s all about research. Everybody back in the day [before AU] used to do this.” She adds, “So sometimes if a loan makes good sense and you can back it up with documentation but it doesn’t quite fit the box exactly perfect,” you still may be able sell that loan.

PROPENSITY TO PAY

Jon R. Daurio, chairman and chief executive officer of Nikkael Capital Corporation, Tustin, California, a new company that is targeting credit-scarred, low-FICO borrowers for refinance loans, says his company is ignoring FICO scores. Instead, after determining sufficient net disposable income, he says that Nikkael will look at propensity to pay, which, he maintains, many people have ignored.

The Intricate Art of Today’s Mortgage Underwriting

“What is in the borrower’s history that indicates that they have a propensity to make the payments? There are some people that have the ability to make the payment but then they’ll decide not to make the payment,” he says. “We look at what caused the late payments. What actually is the borrower’s story? And what actually happened in ensuring that that life event is unlikely to occur again or has been resolved? The only way to determine this is with manual underwriting,” Daurio says. His past experiences during a 20-year career, he adds, showed that “FICO was not a good indicator of whether a borrower was a good credit risk.” As a result, he says, “I think people are getting more comfortable with making loans to people who have hiccups in their credit.” San Jose, California—based FICO has been actively making changes to its FICO scoring processes, beginning with the launch of FICO Score 8 in 2009. On Aug. 7, 2014, it announced that medical debts would be accounted for separately under the new FICO Score 9, differentiating medical from non-medical collection-agency accounts in order to be more predictive of a consumer’s likelihood to repay a debt. Broker Frommeyer says that medical debt has been a problem he has encountered with some borrowers with lower credit scores. “I think [with FICO] looking at it differently is going to help a lot,” he predicts. Adoption, however, is likely to be slow.

ADOPTING NEW SCORING MODELS

Freddie Mac, which does accept such newer models from the credit repositories as Equifax Beacon 5.0, Experian/Fair Isaac Risk Model V2 and TransUnion FICO Risk Score (Classic) 04– two of which are required for all manually underwritten mortgages–is currently analyzing the impact of FICO 8 but has not begun on FICO 9, according to spokesman Brad German. “Retooling the mortgage industry around a reformulated credit score is a complex undertaking,” German points out, with all the players having to analyze any new score’s impact on their systems, operations and ability to evaluate and price risk. But many lenders and their underwriters, as well as the agencies and FHA and VA, already have begun to look differently at medical debt. Houston-based BBVA Compass Bank, for example, uses “the guidelines for medical collections debt that have been set by such specific investors as Fannie Mae, FHA and VA, and consider the overall scope of the borrower’s credit profile,” according to Elliot Salzman, senior vice president and director of consumer policy and underwriting for BBVA Compass. The bank also has made changes in its underwriting in order to follow QM guidelines, he says. “We now follow Appendix Q for all QM originations, with government-sponsored enterprise [GSE] and/or government products as an exception,” Salzman explains. “We’ve also developed a broad portfolio of non-QM products. Additionally, we minimized the overlay on our FHA product, lowering our minimum score requirement to 580,” he says.

A continuing underwriting issue, particularly with FHA mortgages, is the use of overlays.

THE ISSUE OF OVERLAYS

Keypoint Credit Union’s Hartman says overlays that establish higher standards is one way for lenders to protect themselves from buybacks.

KeyPoint Credit Union’s Hartman says overlays that establish higher standards is one way for lenders to protect themselves from buybacks, should underwriting turn out to be inadequate. Overlays, she says, also provide more flexibility as to what investors loans can be sold. “I think most lenders reacted [to the housing market collapse] by tightening lending standards and implementing significant overlays,” says BBVA Compass’ Salzman. “Since then, the industry has seen an easing of both, particularly with FHA loans.” Yet he admits that BBVA Compass “does have minimal overlays in our Federal Housing Administration products. They play an essential role in helping the bank mitigate potential risk.” But because these overlays, like the bank’s loan guidelines, are proprietary, Salzman says he cannot provide specifics. Wells Fargo, says Knudsen, used credit overlays back when it required higher credit scores for conventional mortgages. Now, she notes, “We are looking at all our overlays as a matter of course” to make sure the company provides “access to credit for all customers that are credit-ready.” That overlays might restrict loans to borrowers on the basis of race or national origin is a concern for FHA, says FHA spokesperson Sullivan. “These credit overlays might rise to unfair lending practices,” he points out. “We’re trying to encourage lenders to move away from all these credit overlays, like a credit score higher than what our standards call for, that they’re tacking on,” he says. “Even with our backing of the mortgage, lenders still may be reluctant,” Sullivan admits. “We’re trying to get them to overcome their shyness and get back to lending to these creditqualified borrowers.” “Underwriting is going to be a constantly evolving thing for our world as we keep learning more about consumer behaviors and patterns and things like that,” says Hartman. “It’s going to be a continuing, ongoing evolutionary process for all lenders.” Jerry DeMuth is a Chicago-based freelance writer. He can be reached at demuth933 @earthlink. net. Copyright 2014 Mortgage Banking(R) Magazine & Mortgage Bankers Association, All Rights Reserved., Reprinted with permission

January 2015 - PIPELINE 45

Feature Article

The Infrastructure Predicament By Terry Wakefield

46 PIPELINE - January 2015

The Infrastructure Predicament

TECHNOLOGY APPLIED TO BUSINESS The first rule of any technology used in a business is that automation applied to an efficient operation will magnify efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency. n Bill Gates n Panic is setting in! In my 40 years in the residential mortgage business, I have never witnessed a higher level of frustration and concern by C-level executives who run U.S. mortgage companies. This article provides a replay of a recent series of conference calls I have had with a number of chief executive officers who are very concerned about the state of the operational infrastructure that supports their respective businesses. These calls have been condensed to a three-way WebExTM conversation involving myself (Terry) and fictional CEOs Drew Smart and Bill Legacy. As Frank Webb, star of the old TV series Dragnet (now I am really dating myself) would say, the names (except mine) have been changed to protect the innocent.

Hereâ&#x20AC;&#x2122;s a three-way conversation about how the origination business can be reimagined with the help of technology and better business process management.

January 2015 - PIPELINE 47

The Infrastructure Predicament

Bill Legacy: Thanks for arranging this call, Terry. Drew, how are you doing? Drew Smart: Thanks for asking, but I have had better days. I just finished a board meeting, and my team and I were grilled about the explosion in our mortgage loan production expenses, the reduction in our transaction velocity and the mediocre customer service surveys we’ve gotten back from our borrowers over the past year. In our defense, my chief operating officer presented a series of figures that I’ll share with you. Can you see my screen? Bill Legacy and Terry Wakefield (simultaneously): Yeah, we see it. Drew Smart: Here’s Figure 1, average loan origination and production expense. One of our key directors runs a business that manufactures wireless office equipment. When he saw this figure, he literally screamed: “How can any industry survive a cost increase of

that magnitude? If my math is correct, costs have increased by nearly 230 percent since 2004. This is lunacy!” We pointed out the impact of reduced production volume, escalating costs associated with the regulatory environment, and our existing infrastructure’s dependence on humans to orchestrate work that leads to a very expensive hiring-and-firing cycle to adjust to volume cyclicality. He was not impressed and said, “We have a structural problem that needs to be addressedor we should consider getting out of this business!” Reluctantly, we moved on to Figure 2–average days to close. Another one of our directors runs a logistics company that provides consulting services to local companies with large vehicle fleets. He’s a little more even-tempered, and asked if we had statistics that track our transaction velocity, or average time to close, going back 10 years. Fortunately, we were prepared for that question.

AVERAGE LOAN ORIGINATION AND PRODUCTION EXPENSE IN DOLLARS AND AS A PERCENTAGE OF AVERAGE BALANCE

FIGURE 1

Avg. Production Expense ($) Avg. Production Expense (% of Loan Balance)

$8,000

4.5%

Avg. Production Expense ($)

3.5%

$6,000

3.0%

$5,000

2.5%

$4,000

2.0%

$3,000

1.5%

$2,000

1.0%

$1,000

0.5%

Avg. Production Expense (% of Loan Balance)

4.0%

$7,000

0% 2014-Q2

2014-Q1

2013-Q4

2013-Q3

2013-Q2

2013-Q1

2012-Q4

2012-Q3

2012-Q2

2012-Q1

2011-Q4

2011-Q3

2011-Q2

2011-Q1

2010

2009

2008

2007

2006

2005

2004

Sources: Mortgage Bankers Association (MBA), Federal Housing Finance Agency (FHFA)

FIGURE 2

Refinance Purchase All

TRANSACTION VELOCITY HAS EXTENDED TO ABOUT 40 DAYS, ADVERSELY IMPACTING REVENUE Avg. 2012 49 46 48

Avg. 2013 45 45 46

Average Days to Close Jan Feb 2014 2014 44 40 47 42 45 41

Source: Ellie Mae Origination Insight Report, Sept. 2013

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Mar 2014 37 41 40

Apr 2014 37 40 39

FIGURE 3

INFRASTRUCTURE COLLAPSE

Total loan production expenses (per loan) Origination expense at 1% and assumes an average loan ammount of $250,000 Loan production personnel expense Loan production direct labor expense at 60%

$6,932 ($2500) $4,423 $2,659

Sources: MBA’s Q2 2014 Quarterly Mortgage Bankers Performance Report, The Wakefield Company

The Infrastructure Predicament

From 2003 through 2009, our transaction velocity averaged 15 days from application to closing for refinance transactions and 24 days for purchase money transactions. After a few seconds of silence, he asked if we understood the impact of transaction velocity on revenue and customer service. Our chief financial officer responded that the current, much slower transaction velocity has reduced our annual pertransaction revenue by approximately 50 percent. The director sat stunned. Another director asked how this reduction in transaction velocity impacted our customers’ perception of our service levels. I produced a report that showed only 60 percent of borrowers we gave mortgages to within the last 12 months responded that they would come back to us for their next mortgage. The board chairman and founder of our firm rose to his feet and barked in his Southern drawl, “Houston, we have a problem.” Bill Legacy: Drew, I hate to admit it, but the declining profit-I mean, growing losses- in our mortgage operation caused a similar experience at our board meeting two weeks ago. I did not present the same slides that you did, but I was told to have a plan in place to restore profitability to the mortgage operation within the next six weeks or the topic is going to shift to exiting the mortgage business. It didn’t help that I had to report we had just finalized a settlement in the amount of $220 million with the Federal Housing Finance Agency [FHFA] for mortgages delivered to Fannie Mae in the period of 2005 to 2008. Our chairman remarked we are now officially a member of the “club” that has paid over $120 billion–and rising–in buybacks, legal fees, settlements and fines to various regulators and secondary market investors. He asked if this is the end of our exposure. I could not reassure him. Terry Wakefield: Bill and Drew, I can assure you that you are not alone. We hear stories like yours every day. Some executives blame the Consumer Financial Protection Bureau [CFPB] and/or FHFA. Some blame the inevitability of volume cyclicality. Others blame government policies that encouraged the extension of credit to people who could not possibly repay their mortgages. Others blame greedy loan officers and unscrupulous third-party loan originators. There is no question that the subprime crisis was fed by a chain of greed that permeated the entire spectrum of mortgage lending and servicing, but playing the blame game ignores the real problem. Drew, your director is correct. The mortgage industry has a structural problem that relates directly to outdated operational infrastructure. Fortunately, a small but growing number of lenders are facing facts and admitting that their current infrastructure is to blame and must be reconfigured if they are going to prosper in this business.

Bill Legacy: Terry, I agree with youbut every time we explore options, we are faced with evaluating the capabilities of the traditional loan origination system [LOS] vendor community. Something is missing. What is it? Drew Smart: Ditto. Where can we turn? Terry Wakefield: Before we go down that path, let me take control of the WebEx and show you Figure 3-the infrastructure collapse. This dives a little deeper into Drew’s first figure. Like Drew, we subscribe to the Mortgage Bankers Association’s [MBA’s] Quarterly Mortgage Bankers Performance Report. Historically, loan production direct labor expense represents approximately 60 percent of loan production expense. But, in first-quarter 2014, the industry reached a historic high of $3,315 per closed loan. In second-quarter 2014 things improved, but loan production direct labor costs remain over $2,600 per closed loan. This stunning statistic points to the industry’s fundamental infrastructure problem. Humans continue to orchestrate the work. Since 2003, we have conducted detailed process architecture analysis in 34 different loan production environments representing all channels of origination. While there is a perception that individual lenders have some form of ‘secret sauce’ that drives their respective loan production environments, our experience demonstrates just the opposite. All lenders preform the same tasks, but not necessarily in the same order or by workers with the same titles. Lets face it–for the past several years, more than 90 percent of all mortgages have been purchased or securitized by government-sponsored enterprises [GSEs] Fannie Mae, Freddie Mac or insured by the Federal Housing Administration [FHA]. So, if 90 percent end up with the GSEs or FHA, one would think that a common manufacturing process would exist to produce mortgages in the United States, and that platform would significantly reduce production costs over time. Bill Legacy: Terry, I think I know where you are headed. A few weeks ago, I had a three-hour meeting with our COO, and we met informally with 20 of our most experienced loan production personnel. They were honored we would take time to have a frank discussion on how they did their jobs and what we could do to make them more effective. After an hour or so, light bulbs started going on. It was clear that each of these capable individuals had their own workarounds to overcome the deficiencies of the systems they use to produce loans. These workarounds take the form of Postit® notes on computer screens, notebooks in desk drawers or, worst of all, memorized tasks that reside in their respective minds. We have 220 people in this particular production environment. I finally asked the audience: “Do we have 220 different processes in place?” They all agreed.

“The mortgage industry has a structural problem that relates directly to an outdated operational infrastructure.” Terry Wakefield

50 PIPELINE - January 2015

The Infrastructure Predicament

“How is it possible to control costs, ensure compliance and deliver great customer service when you have 220 undocumented and unsanctioned processes in place?” Wakefield

Terry Wakefield: Bingo! Bill, you just hit the nail squarely on the head. How is it possible to control costs, ensure compliance and deliver great customer service when you have 220 undocumented and unsanctioned processes in place? It’s impossible. Drew Smart: Terry, you and I have had this discussion before. Lenders do not think of themselves as manufacturers. We tend to obsess over the complexities of mortgage lending rather than focusing on the common attributes of loan production. We’re always emphasizing increased market share and topline revenue growth. It sounds like we need to shift greater focus to process definition and technology that can execute a uniform, well-defined process. Terry Wakefield: Let me offer a relevant quote from Bill Gates here. He said, “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” That absolutely nails it. I cannot recount how many times we have witnessed lenders applying technology to an inefficient process. The outcome is as predictable as Gates’ quoteinefficiency magnified. Bill Legacy: OK, I am not going to quibble with Bill Gates. But I have six weeks to convince my board that we should stay in the mortgage business. Let’s talk about an action plan that will make the case resonate. Terry Wakefield: The first thing to do is to use proven tools to define the current state in your loan production environment. You’re already off to a good start based on your threehour meeting. I would involve those 20 people you have already gathered and break them into their respective functional divisions of labor. Interview them to find out; 1) the names of the tasks currently performed; 2) who performs the task; 3) when pipeline fallout occurs; 4) how frequently the task occurs; 5) the calculation of adjusted task time to the fraction of a minute; and 6) the calculation of task cost to the penny. My guess is that after three to four weeks, you will have concurrence from these 20 people that there are currently 300 to 350 different tasks taking place in the current state. These tasks result in a direct labor cost of approximately $2,600 per closed loan. Once current-state definition is completed, you will have a valuable baseline of direct labor cost data that you can use to conduct return on investment [ROI] analysis on the technology investments necessary to achieve an optimized state. Drew Smart: Terry, I am confident that we already have a good handle on our loan production direct labor cost. Our current direct labor loan production expense is right around $2,800 per closed loan. Can we bypass this first step and move on? Terry Wakefield: Sure. Each time we have analyzed a loan production environment, we have stored the output into

what we refer to as the INPLOREtm Task Level Database. INPLORE now contains detailed information on more than 3,700 specific loan origination and production tasks. Using INPLORE in collaboration with your production managers and supervisors, it is possible to create what we refer to as an optimized production time summary [OPTS]. It is critical that senior compliance personnel are involved in this effort to ensure that the OPTS output represents a compliant, optimized production environment. Documenting the optimized state focuses on three objectives: c Removing non-value-added activities. We often hear frustration regarding workers checking and rechecking the work performed by others. c Improving workflow, consolidating job functions and eliminating functional divisions of labor. Functional divisions of labor create expensive bottlenecks in cyclical industries like mortgage lending. c Defining tasks that can be automated through deployment of software components not available in traditional loan origination systems. Definition of an optimized process includes task level metrics similar to those used to define the current state. That is, the OPTS describes: the human or system that performs the task; the impact of fallout; task frequency; adjusted task time; and adjusted task cost. Upon completion of process optimization, the number of tasks performed in the loan production environment is typically reduced to a range of 110 to 130 tasks-down from 300 to 350 in the current state. Of those 110 to 130 tasks, somewhere between 40 percent and 50 percent are automated, meaning that the task count performed by humans is reduced from 300 to 350 down to 55 to 78 tasks. Direct labor production costs are reduced to a range of $550 to $650 per closed loan, depending on the production channel. Drew, in your case this would produce a savings of $2,150 to $2,250 per closed loan. So, if you are closing 20,000 loans per year, you will realize direct labor cost savings of more than $40 million annually. Drew Smart: You definitely have my attention. Bill Legacy: Mine, too. So, how does this process architecture optimization work translate to automation? Terry Wakefield: That’s the $64,000 question. Once the optimized state is defined at the task level, it must be thoroughly documented at a step level. Think of tasks as defining what work must be performed and steps as describing how each task is performed. Documenting step-level descriptions of task performance is hard and unglamorous work. Bill Legacy: How is this possible, given the variability that surfaces as loans are produced? Terry Wakefield: That’s a great question, Bill. Task-level detail addresses this variability by defining required tasks

January 2015 - PIPELINE 51

The Infrastructure Predicament

“The LOS needs to be demoted in importance so that the software components...enable automated work orchestration.” Wakefield

that apply to all loans and random tasks that occur on an unscheduled basis or are required based on loan-specific circumstances. Variability is a reality in most manufacturing processes. The next time you’re on the freeway, focus on the variability of cars you see. Managing this variability requires human definition of an optimized manufacturing process and a heavy dependence on technology. Bill, to answer your question about automation, think of task-level detail as the sheet music that allows best-of-breed technology components to automate work orchestration and eliminate human interference with the optimized process. Because task-level detail defines the optimized process down to the step level, it also serves as the training manual for new employees and those who want to improve their value to the enterprise by learning cross-functional skills. Thus, task-level detail ensures that there is no disconnect from what workers learn and how they actually perform their work tasks. Bill Legacy: So, task-level detail is the “code” that drives software performance. What are these software components that are not typically imbedded in an LOS? Terry Wakefield: Before I describe those software components, let me emphasize that current LOSes do perform many functions very well. They have solid product and pricing engines, most are effectively integrated with settlement services providers and documentation preparation firms, and they can all ingest output from point-of-sale systems used by loan originators. So, I am not suggesting that you replace your LOS. However, the LOS needs to be demoted in importance so that the software components I am about to describe enable automated work orchestration. Drew Smart: I am happy to hear that, because we just spent a lot of money changing our LOS. Bill Legacy: We did the same last year-and to be honest, we have not experienced the productivity gains we expected. Terry Wakefield: Bill, we hear your message from a lot of lenders. Getting back to Bill Gates, no technology will improve an inefficient process. Bill Legacy: So, let’s talk specifics. Terry Wakefield: Before I describe these software components, I should mention that they are all commercially available and have proven their value in many industries. Inexplicably, they are not prevalent in the mortgage industry. The first of these is business rules management software [BRMS]. Traditionally, business rules have been hard-coded directly into applications, like an LOS. Business logic is the most volatile aspect of a business application; however, the pains of maintaining rules in application code have become more obvious and significant as the pace of business demands more agility. Agility requires that you externalize business rules logic and manage this logic in a way that is easy to build and easy to integrate as decision services while still meeting your enterprise performance and scalability demands.

52 PIPELINE - January 2015

Drew Smart: The last word I would use to describe our loan production environment is agile. We are very dependent on our LOS vendor to effectuate change, and it costs us a lot of money. Have you had direct experience using business rules management software? Terry Wakefield: We recently completed a project for a retail mortgage lender to build a prototype with one of our business partners. In a matter of days, one of our senior process architects authored hundreds of rules to automate dozens of mundane tasks contained in task-level detail. No programmers were required-just a gifted process architect with an intuitive understanding of business logic as defined in task-level detail. Bill Legacy: I get the concept of extracting business logic from a hard-coded application. In fact, our head of IT met with a BRMS vendor at the last MBA technology conference, and he was impressed. Let’s hear more. Terry Wakefield: The next software component is business process management software [BPMS]. All commercially available BPMS vendors deploy process-mapping tools to create process maps that drive automated work orchestration. Going back to the prototype project, we took six tasks in task-level detail and used a leading BPMS vendor’s processmapping tool to create a process map for each of the six tasks. Using easy-to-use click, drag and drop functionality, the same process architect I referred to earlier completed the six process maps in two days. Again, no programmers involved. Drew Smart: What do you mean by automated work orchestration? Terry Wakefield: Simply stated, BPMS pushes work tasks to the right worker at the right time. Workers do not request tasks; tasks are pushed to workers as the BPMS engine determines when a task needs to be performed. Each time a task is pushed to a worker, the worker’s performance is monitored in real time per the metrics in the OPTS and task-level detail. If a worker has not performed a specific task in a while and is unsure of the steps to follow, each task pushed to a worker is accompanied by a link to that task’s task-level detail. So, there is only one source that guides each worker’s performance-the BPMS process maps that emanate from task-level detail. If a task is not in task-level detail, it cannot exist in the production environment. Bill Legacy: So, the problem of having 220 different processes disappears? Terry Wakefield: Exactly, Bill-but let me go further. As certain tasks designated by compliance or management are performed, BPMS triggers automated internal and/or external communication through a set of management-prescribed alerts, escalations and scripted messages. The time-stamping of tasks, the tracking of worker performance and the monitoring of task outcome creates an audit trail of all task performance in the production environment. This level of auditability is precisely what the industry needs in order to proactively respond

The Infrastructure Predicament

to the demands of the CFPB and other regulatory agencies. Drew Smart: We have our first CFPB exam in two months, and we are more than a little nervous. Terry Wakefield: That’s a good segue to the third critical software component- enterprise content management software [ECMS]. To deal with the avalanche of paper received from external sources and produced internally, we advocate establishing a document management center [DMC]. It would focus on digitizing all data received from external sources using ECMS and depositing all digitized data in a borrower- specific virtual loan file. Based on our experience, there are approximately 4,000 discrete data elements in a closed loan file. Advances in ECMS have made it possible to extract those 4,000 discrete data elements from the documents they reside on, and deposit those data elements into the virtual loan file along with an image of all external and internally produced documents. Bill Legacy: Wait a minute. Are you suggesting that we process all of our loan transactions electronically? Is that even legally possible? Terry Wakefield: E-SIGN [Electronic Signatures in Global and National Commerce Act] legislation enacted in 2000 permits a lender to conduct a mortgage transaction in a purely electronic fashion, provided that the borrower consents. The way communication patterns are changing, I am convinced that a growing percentage of borrowers will consent to an electronic transaction versus the painful fulfillment experience that currently plagues the industry. Drew Smart: So, we may need two fulfillment environments-one that caters to borrowers who consent to an electronic transaction and another for those who don’t. Terry Wakefield: You’re right, but I would look at it with a different twist. You already have the non-electronic environment. Why not launch a greenfield project to build the electronic environment, and expand it as more borrowers consent? You can control the expansion of the electronic environment by inviting borrowers as electronic capacity scales. I’d bet that within three years, you’ll be processing more loans in the electronic environment than in the current one. Bill Legacy: Terry, I have to get to another meeting in 15 minutes. Can we wrap this up? Terry Wakefield: Sure, Bill. Let me conclude. Assuming the borrower consents to an electronic mortgage process, let’s look at the consequences. The DMC’s role in digitizing all external documentation received from the borrower, and storing the images and extracted relevant data from those images in a borrower-specific virtual loan file, prevents any paper from entering the loan production environment and enables a paperless workflow. Production workers have access only to the virtual loan file as tasks are pushed to them. BPMS provides access to only that segment of the virtual loan file that is relevant to the task the worker receives. Best-of-breed ECMS continually populates the virtual loan file with images and data extracted from external documents and all documents produced internally during the loan production process. BPMS continually updates the virtual loan file with data on worker task performance.

So, in concert with BPMS, ECMS enables a borrower-specific virtual loan file that includes an audit trail ofc all of the approximately 4,000 discrete data elements aggregated during the loan origination and production process; c the performance of all tasks contained in a task-level detail, including the system or worker who performed the task, task duration, task cost, task outcome and task- specific alerts, escalations and messages; c all internal and external communication, including voice, email, text messages and social media interactions that occurred during the loan origination and production process;

“The tension between mortgage lenders and secondary market lenders is totally unconstructive and has imposed an expense of more than $120 billion on the residential mortgage industry.” Wakefield

c all documents received from the borrower and other external sources, and all documents produced internally, including federal and state-specific disclosures and time stamps of when all documents were delivered to the borrower; and

c all secondary market transaction documentation and, if you also service loans, all loan servicing and loss-mitigation transaction data. Basically, the virtual loan file provides 100 percent data transparency of the entire loan life cycle. This is profound compared with today’s environment, where loan-level data is trapped in myriad systems and databases. Now, the coup de grâce. The virtual loan file allows secondary market investors to conduct their quality control of loans prior to the funding of the loan by the lender, basically eliminating buyback exposure. The tension between mortgage lenders and secondary market investors is totally unconstructive and has imposed an expense of more than $120 billion on the residential mortgage industry. The technology exists to dissipate this tension and re-establish trust through the deployment of best-of-breed technology. Drew Smart: Pardon my skepticism, but do you have any additional information you can send me and our COO that goes into greater detail? If you do, and it validates this call, we’ll want to meet with you soon. Bill Legacy: Terry, send it to me as well. Terry Wakefield: I’ll send you both a PowerPointTM deck later today. Thanks for your time today. I really appreciate it. Terry Wakefield is chief executive officer of The Wakefield Company LLC, Mequon, Wisconsin. He can be reached at twakefield@twellc.com. Copyright 2014 Mortgage Banking(R) Magazine & Mortgage Bankers Association, All Rights Reserved., Reprinted with permission

January 2015 - PIPELINE 53

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Outsource Services • Correspondent Lending • Document Services Settlement Services • Loan Servicing • Due Diligence

Market Share

Market Share–

Credit Unions Are Holding On! Tracy Ashfield This time last year I talked about mortgage loan market share for credit unions and the pride that went with seeing it climb to 6.5% at the end of third quarter 2013. The question I posed is, would credit unions be able to hold on to that share in 2014? We knew we wouldn’t be riding the refinance wave, and the share would instead have to be earned with purchase loans. Well, it feels great to be here in January 2015 and know the share didn’t just stay stable, it grew. As of third quarter 2014, credit union market share had grown to 8%. Impressive. And the credit goes to all the lenders who developed purchase money business plans. For some it was a focus on professional development: recruiting sales leaders and creating compensation plans that motivated folks to get out there and ask for the business. For others it was creating niche products designed to help first-time homebuyers achieve their dream of home ownership. I also watched credit unions tighten their belts and work to develop operational efficiencies to ensure they could offer competitive pricing. Many used a combination. One thing for sure: lenders networked, rallied together and stay determined to be their members’ choice for home loans.

As you review the Top 300 ranking report and historic share, take a look at how the share of ARM loans has increased in 2014. It hasn’t topped 15% since 2006, when I suspect the increase was driven by interest rates. What is at work this time? I believe much of current ARM lending involves loans that don’t meet the Qualified Mortgage requirements. We continue to hear that most credit unions are committed to making non-QM loans, but the absence of a secondary market causes liquidity concerns. I have seen some amazing niche ARM products this year. Kudos to the credit unions working hard to meet the needs of members that might otherwise fall outside the QM box! I suspect in the near future we won’t have to speculate about non-QM statistics. Why? Today the NCUA 5300 call report is noticeably silent on the topic of QMs. My guess is, before too long we’ll see Schedule A amended to address nonQM lending. More to report, yes, but if the reporting requirements change, we may have more than anecdotal information on non-QM lending. Stay tuned.

Credit Union 1st Mortgage Market Shares 1989 - 2014 9% 8% 7% 6% 5% 4% 3% 2% 1%

Sep 2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

January 2015 - PIPELINE 55

Market Share

Credit Union market share didn’t just stay stable, it grew. As of third quarter 2014, CU market share had grown to 8%.

Credit Union 1st Mortgage Market Shares Detail 1989 - 2014

CU Share Credit Union 1st Mortgages Total U.S. Residential (MBA) of Total U.S. Year $ Granted (Blns) % ARMs # Granted (000’s) Average Mort Orig (Blns) Originations 1989 6.4 107 59,813 453 1.41% 1990 6.2 100 62,000 458 1.35% 1991 7.5 118 63,559 562 1.33% 1992 16.5 236 69,915 894 1.85% 1993 19.5

281

69,395

1,020

1.91%

1994 13.3 204 65,292 769 1.73% 1995 10.00 149 67,204 639 1.56% 1996 15.60 207 75,508 785 1.99% 1997 17.30 216 80,056 834 2.07% 1998 31.90

360

88,734

1,656

1.93%

1999 28.00

308

91,027

1,379

2.03%

2000 20.60

216

95,415

1,139

1.81%

2001 46.60

421

110,794

2,243

2.08%

2002 62.30

523

119,187

2,852

2.18%

2003 88.23 18.37%

719

122,666

3,810

2.32%

2004 57.20 16.55%

422

135,501

2,772

2.06%

2005 60.44 14.79%

408

148,309

3,027

2.00%

2006 54.44 15.16%

360

151,425

2,726

2.00%

2007 60.31 12.54%

363

166,163

2,307

2.61%

2008 70.29 12.50%

412

170,713

1,509

4.66%

2009 95.01 8.20%

574

165,620

1,995

4.76%

2010 84.51 8.45%

510

165,802

1,572

5.38%

2011 82.55 8.86%

513

160,994

1,262

6.54%

2012 124.08 6.59%

742

167,169

2,044

6.07%

2013 120.54 9.32%

702

171,724

1,845

6.53%

Sept ‘14 68.10 15.55% 389 174,999 844 8.07%

56 PIPELINE - January 2015

The Top 300

The Top 300 –

Leading the market share charge Top 300 First Mortgage Granting CU Market Share as of September 30, 2014 $ Originated # Originated $ Outstanding 1st Mortgages 1st Mortgages 1st Mortgages (Fixed & Adjustable) (Fixed & Adjustable) (Fixed & Adjustable) Top 300 1st Mortgages Originated CUs All Originating CUs (3,359 CUs)* Top 300 Share

52,592,185,603 68,104,522,773 77.2

253,116 389,165 65.0

197,886,047,256 289,017,116,438 68.5

$ Sold 1st Mortgages 17,714,480,218 22,187,986,355 80

*CUs who granted $10,000 or more 01/14 - 09/14

Top 300 First Mortgage Granting CU as of September 30, 2014 Name of State Credit Union 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

VA VA NC CA CA MI WA AK OH NY CA CA CA CA UT ID CO UT OR TX MA IL TX TX

Navy Pentagon State Employees’ Kinecta First Tech Lake Michigan BECU Alaska USA Wright-Patt Bethpage San Diego County Logix Patelco SchoolsFirst Mountain America Idaho Central Elevations America First OnPoint Community Security Service Digital BCU Randolph-Brooks University

$ Originated # Originated $ Outstanding 1st Mortgages 1st Mortgages 1st Mortgages $ Sold RE Loans Sold (Fixed & Adjustable) (Fixed & Adjustable) (Fixed & Adjustable) 1st Mortgages but Serviced by CU $5,574,302,908 $2,989,833,137 $2,158,851,575 $1,655,356,538 $1,001,455,835 $903,173,498 $807,704,721 $784,119,817 $702,924,185 $653,093,475 $637,582,750 $554,874,480 $492,528,672 $463,507,385 $450,324,118 $428,769,154 $425,110,881 $422,859,914 $409,169,083 $399,347,524 $396,656,410 $373,479,171 $370,411,024 $370,010,325

23,464 7,327 14,445 3,723 2,695 6,602 3,289 3,231 5,572 2,183 1,681 1,540 1,286 1,553 3,380 2,712 1,597 4,312 3,752 2,113 1,266 1,791 1,942 1,357

$19,332,762,669 $10,285,450,847 $12,939,098,631 $1,713,682,947 $2,721,966,081 $1,665,180,706 $3,117,412,076 $633,319,943 $489,414,596 $2,022,945,238 $2,823,135,274 $1,833,941,120 $1,599,409,743 $2,153,474,185 $1,314,679,379 $556,178,205 $467,855,631 $766,032,587 $922,659,344 $1,005,504,130 $2,077,108,970 $841,742,634 $1,713,957,268 $612,089,671

$2,025,910,046 $285,301,163 $1,419,889 $1,169,812,370 $248,633,732 $748,256,435 $243,380,172 $683,467,289 $260,197,948 $241,427,738 $70,083,524 $111,502,921 $89,770,654 $66,742,207 $168,245,284 $261,497,914 $265,815,971 $225,665,249 $148,523,066 $68,707,919 $120,050,329 $197,469,437 $25,675,803 $218,624,781

$19,915,180,751 $4,416,976,855 $254,774,509 $3,343,849,160 $2,669,786,623 $4,728,863,300 $3,531,400,523 $4,495,209,832 $2,875,346,614 $3,274,976,134 $703,169,352 $941,550,267 $1,086,504,548 $1,665,393,366 $1,206,202,628 $862,390,732 $1,532,149,717 $2,221,068,018 $1,148,434,744 $91,716,488 $1,055,055,354 $1,694,454,748 $297,974,354 $98,346,807

January 2015 - PIPELINE 57

The Top 300

25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70

WI WI CO NC WI CA WI WI IL PA IL CA IA MO GA AZ DC CA CA WA CA CA FL TN NY NC NY CA FL WI FL CA NY CA CO TX CA CA VT CA OR CA NY NY TX IA

Community First Summit Ent Coastal Royal Chevron University Of Wisconsin Landmark Alliant Citadel CEFCU The Golden 1 University Of Iowa Community CommunityAmerica Delta Community Desert Schools Bank-Fund Staff Premier America Star One WSECU Mission KeyPoint VyStar Eastman State Employees Local Government CAP COM Provident GTE Financial Altra Suncoast California Visions Evangelical Christian Bellco Advancial Redwood Xceed Financial New England Stanford Advantis Wescom Teachers Hudson Valley TDECU Veridian

58 PIPELINE - January 2015

$357,922,599 $356,643,109 $345,035,105 $339,231,638 $325,934,448 $310,112,869 $308,986,333 $306,014,432 $302,681,590 $295,956,646 $293,437,067 $284,798,889 $282,211,835 $279,290,771 $269,155,707 $268,563,442 $266,209,179 $265,547,963 $259,301,662 $259,121,690 $251,043,300 $247,078,789 $240,013,263 $232,732,568 $231,114,744 $218,059,603 $216,485,688 $213,770,660 $213,765,548 $211,117,044 $209,011,803 $208,438,758 $207,687,500 $207,578,046 $205,062,178 $204,058,161 $197,811,650 $193,050,351 $192,228,939 $185,732,758 $182,776,538 $180,985,040 $180,844,132 $179,536,450 $176,222,875 $174,964,640

2,781 2,173 1,889 1,031 1,440 994 1,759 2,097 512 730 1,599 1,168 1,704 1,463 1,296 1,816 554 340 724 824 656 367 1,720 1,875 1,762 1,771 1,415 484 1,243 1,231 1,614 477 992 61 1,055 592 611 371 1,041 269 694 577 689 903 1,308 1,188

$1,191,174,837 $833,640,273 $1,466,170,097 $901,046,518 $629,614,042 $1,684,154,321 $309,634,575 $849,917,667 $3,570,937,067 $858,051,184 $2,123,639,848 $1,568,905,470 $1,237,166,236 $587,863,787 $1,348,853,492 $430,097,263 $1,734,560,556 $908,872,118 $2,429,702,821 $435,349,572 $695,126,493 $374,579,125 $1,844,053,552 $1,448,532,391 $662,619,564 $400,483,237 $530,006,489 $743,978,493 $362,632,136 $385,093,220 $1,748,498,880 $430,360,979 $1,210,715,010 $681,882,558 $761,932,904 $433,702,080 $952,922,004 $535,815,497 $462,634,825 $676,115,216 $371,314,401 $759,401,332 $1,099,209,937 $694,127,028 $715,164,681 $742,326,598

$6,780,100 $131,124,718 $35,724,406 $141,723,919 $120,193,025 $0 $211,584,000 $174,345,769 $25,567,394 $30,880,887 $0 $10,491,559 $207,770,855 $250,370,142 $26,408,599 $257,127,137 $24,131,495 $8,953,250 $0 $81,426,588 $58,838,450 $163,877,653 $52,168,265 $206,917 $114,046,372 $150,321,720 $78,099,252 $76,196,110 $183,153,895 $107,814,405 $3,919,843 $57,785,436 $5,935,818 $134,690,777 $49,917,401 $89,608,196 $73,616,600 $9,571,812 $122,863,746 $40,855,687 $85,992,447 $61,259,850 $48,487,007 $90,235,671 $102,611,995 $55,399,161

$5,206,569 $1,404,681,461 $680,486,548 $1,118,941,618 $1,539,435,683 $21,838,463 $1,147,534,919 $1,565,361,787 $196,458,768 $347,694,914 $120,482,777 $392,643,311 $121,781,643 $1,359,957,343 $297,409,014 $1,618,011,287 $457,336,307 $233,072,609 $12,232,895 $1,281,810,257 $784,529,102 $167,681,588 $298,127,237 $7,271,034 $1,233,765,593 $0 $765,585,074 $1,180,144,491 $1,379,566,637 $810,348,491 $408,136,363 $591,864,289 $79,666,808 $1,193,362,970 $521,950,086 $296,826,178 $557,106,579 $66,598,954 $1,242,459,348 $468,193,408 $629,225,901 $1,211,378,033 $1,298,305,151 $1,249,458,004 $306,398,565 $584,820

Long Great Partnership. Partnership. Long Live A Great As multiplelines linesofofbusiness businessand andstrengthened strengthened billion Asaaproven provenindustry industry leader leader operating operating multiple byby $29$29 billion in in assets,BOK BOKFinancial Financial delivers delivers the one their financial partner. assets, one thing thingall allcustomers customersseek: seek:confidence confidencein in their financial partner. BOKFinancial FinancialCorrespondent Correspondent Mortgage Mortgage Services products and services BOK Servicesoffers offersaafull fullsuite suiteofofmortgage mortgage products and services especially for Banks and Credit Unions. We are a direct to Agency seller and one of the top 50 issuers especially for Banks and Credit Unions. We are a direct to Agency seller and one of the top 50 issuers Ginnie Mae securities in the U.S. In addition, we retain the servicing on every loan we purchase. ofofGinnie Mae securities in the U.S. In addition, we retain the servicing on every loan we purchase. We exemplify our dedication to the success of our clients and partners by providing solutions

We exemplify our dedication to the success of our clients and partners by providing solutions that help them to retain and continue to meet the needs of their own customers. that help them to retain and continue to meet the needs of their own customers. Advantages to partnering with us:

Advantages to partnering with us: • Non Solicitation Agreement

• •Non Solicitation Agreement Reverse Referrals Limited Overlays • •Reverse Referrals • Limited Overlays

• Common Sense Approach CommonForward Sense Purchase ApproachReview ••Straight ••Valued Partnership and Communication Straight Forward Purchase Review

• Valued Partnership and Communication

We have the experience and capabilities you want to satisfy the needs of your customers.

We have us thetoexperience andcan capabilities you want to satisfy the needs of your customers. Contact learn how we partner today! Contact us to learn how we can partner today!

855.890.1485 | ClientRelations@bokf.com | www.bokfinancial.com/cms

855.890.1485 | ClientRelations@bokf.com | www.bokfinancial.com/cms © 2015 BOK Financial Correspondent Mortgage Services, a division of BOKF, NA. Member FDIC. Equal Housing Lender © 2015 BOK Financial Correspondent Mortgage Services, a division of BOKF, NA. Member FDIC. Equal Housing Lender

The Top 300

71 PA 72 CA 73 AZ 74 TX 75 CA 76 IN 77 MN 78 NV 79 CA 80 PA 81 CA 82 UT 83 WI 84 CA 85 CA 86 CA 87 VA 88 MN 89 MI 90 IN 91 CA 92 MD 93 RI 94 MI 95 MD 96 IA 97 RI 98 CA 99 ND 100 MI 101 VA 102 IN 103 GA 104 NY 105 WA 106 IA 107 UT 108 CA 109 WI 110 IN 111 TX 112 WA 113 IN 114 NY 115 VA 116 NY

Police And Fire Firefighters First Arizona State American Airlines Technology Forum Wings Financial One Nevada NuVision Members 1st SAFE Goldenwest Westconsin Travis Financial Partners California Coast Northwest TruStone Financial Michigan State University Teachers Orange County’s SECU of Maryland Navigant DFCU Financial NASA Dupaco Community Pawtucket Partners Town and Country United Apple Purdue Georgia’s Own United Nations Spokane Teachers Collins Community Utah Community San Francisco Fire Covantage Beacon Navy Army Community Whatcom Educational Eli Lilly Self Reliance New York Virginia ESL

60 PIPELINE - January 2015

$174,789,217 $172,687,196 $172,021,667 $165,845,490 $162,976,107 $161,189,818 $152,413,846 $152,226,396 $151,138,213 $150,249,206 $148,523,511 $147,399,135 $145,204,454 $141,177,386 $140,497,658 $139,171,938 $139,094,300 $136,138,264 $134,543,213 $134,390,711 $134,389,247 $133,533,275 $131,886,338 $130,554,703 $128,428,813 $124,498,862 $122,171,700 $121,686,259 $119,907,028 $119,819,893 $119,797,907 $119,257,630 $117,560,600 $117,273,543 $116,195,841 $114,932,270 $113,199,986 $111,510,242 $110,689,920 $109,926,388 $109,316,869 $108,833,546 $108,826,954 $108,738,195 $108,707,993 $107,305,000

1,078 393 810 869 240 804 706 801 439 1,025 609 777 1,406 595 348 478 518 708 878 630 523 648 600 794 332 883 754 442 543 567 294 563 453 322 689 721 609 258 1,080 350 872 511 554 205 668 723

$1,373,326,453 $530,769,838 $511,304,049 $1,842,505,058 $606,078,361 $304,066,770 $595,731,515 $162,879,938 $462,129,905 $574,912,012 $520,394,449 $283,623,180 $372,214,497 $375,070,830 $395,121,612 $554,207,039 $396,331,698 $285,404,142 $760,986,305 $835,020,274 $446,421,745 $1,035,999,604 $797,877,952 $675,738,883 $421,324,929 $279,377,205 $1,040,283,827 $404,089,776 $155,135,237 $717,176,771 $629,643,038 $374,353,678 $411,887,936 $1,017,950,593 $812,279,840 $321,942,469 $191,575,967 $380,422,082 $526,296,836 $596,022,182 $791,878,000 $538,200,946 $326,156,760 $647,977,524 $510,795,812 $383,693,669

$43,019,692 $6,483,465 $76,361,100 $0 $6,821,883 $91,530,159 $55,397,179 $121,598,605 $67,990,386 $69,420,579 $87,168,933 $88,994,932 $89,565,130 $54,294,659 $49,026,706 $40,560,397 $108,978,279 $100,052,326 $341,295 $2,048,859 $38,963,867 $76,663,000 $23,272,372 $95,050,369 $29,793,859 $61,132,890 $10,091,722 $44,492,090 $72,198,471 $27,843,291 $46,003,434 $58,092,114 $17,887,023 $9,160,840 $8,535,016 $33,018,325 $74,508,344 $24,633,300 $13,293,153 $0 $0 $72,379,161 $32,503,684 $0 $12,813,262 $70,280,902

$511,384,762 $118,591,954 $623,246,612 $6,786,205 $176,865,519 $638,967,971 $394,576,240 $174,816,666 $449,010,628 $0 $612,775,134 $222,107 $766,241,025 $297,466,672 $555,177,118 $52,593,044 $1,466,059,667 $369,056,731 $0 $4,038,591 $283,019,064 $812,636,345 $146,543,896 $447,050,707 $16,962,584 $561,616,350 $211,895,493 $520,806,048 $0 $64,556,914 $275,250,044 $413,309,032 $70,017,900 $74,655,816 $176,991,113 $0 $65,832,698 $258,284,442 $149,957,845 $0 $0 $364,985,803 $0 $0 $180,444,215 $1,024,194,142

The Top 300

117 MN 118 NJ 119 TN 120 CA 121 IL 122 NM 123 NC 124 NY 125 NJ 126 FL 127 OK 128 WI 129 MA 130 NY 131 IL 132 CA 133 MD 134 CT 135 TX 136 CT 137 CA 138 WI 139 NH 140 WI 141 AL 142 MA 143 PA 144 WI 145 FL 146 WA 147 NY 148 NM 149 CA 150 PA 151 NY 152 VA 153 OH 154 OK 155 WA 156 VA 157 AL 158 MN 159 NY 160 FL 161 TN 162 NV

Central Minnesota Affinity ORNL North Island Deere Employees Sandia Laboratory Truliant Nassau Educators Polish & Slavic Fairwinds Truity Educators Jeanne D’Arc Sunmark Great Lakes Meriwest Tower American Eagle GECU Charter Oak Western Capital St. Mary’s Bank Fox Communities Redstone Metro TruMark Financial Marine Space Coast Numerica Melrose New Mexico Educators American First Pennsylvania State Employees Corning Langley Superior Weokie iQ State Department APCO Employees Affinity Plus Empower Grow Financial Ascend Silver State Schools

$106,962,182 $106,796,505 $106,779,596 $106,386,961 $105,681,483 $104,118,564 $103,128,205 $102,632,060 $100,894,970 $99,205,199 $99,035,192 $98,965,847 $98,650,042 $98,058,884 $96,099,864 $95,165,672 $95,120,265 $94,615,997 $94,031,120 $93,839,835 $93,637,186 $91,905,240 $91,409,453 $90,020,840 $89,373,355 $88,202,221 $87,192,907 $87,068,581 $86,334,805 $85,592,147 $84,849,149 $84,499,445 $84,493,434 $83,746,760 $82,737,758 $82,261,455 $81,380,015 $80,585,723 $80,431,906 $80,428,141 $79,933,286 $79,769,830 $78,977,859 $78,341,973 $78,201,625 $77,859,620

597 341 751 168 638 388 748 217 420 661 505 922 256 501 284 149 399 436 973 606 292 905 501 967 625 302 358 1,100 503 481 102 462 212 613 549 573 812 411 322 237 489 533 676 478 636 319

$349,173,730 $1,183,255,835 $478,593,952 $434,949,317 $333,814,134 $639,360,838 $449,399,487 $566,103,400 $723,641,192 $511,805,555 $159,588,349 $632,365,370 $538,145,533 $138,797,935 $170,849,907 $339,158,478 $462,419,140 $413,539,088 $409,515,346 $487,896,605 $585,317,777 $461,862,887 $280,262,279 $614,612,505 $381,293,986 $444,710,147 $482,481,835 $206,137,393 $816,730,835 $376,959,663 $366,504,021 $401,086,255 $181,958,961 $444,986,710 $260,071,106 $291,903,102 $187,766,790 $261,386,669 $133,927,782 $497,252,490 $400,291,885 $414,333,939 $218,237,636 $528,672,979 $515,846,982 $324,586,867

$31,397,111 $5,187,972 $45,154,750 $7,076,750 $20,974,000 $4,321,625 $15,064,630 $28,476,000 $8,411,129 $1,945,740 $66,294,332 $9,291,219 $33,313,029 $42,532,299 $38,520,631 $142,385,850 $59,358,919 $19,082,062 $42,043,090 $16,990,490 $27,274,760 $8,272,866 $57,462,901 $4,822,500 $57,135,572 $42,098,705 $37,092,211 $57,260,143 $41,140,415 $30,938,067 $0 $41,653,144 $26,764,500 $7,354,615 $26,113,816 $9,240,700 $56,729,487 $4,812,939 $39,594,845 $43,546,725 $0 $148,365,600 $59,279,781 $21,182,771 $0 $20,600,610

$132,864,379 $225,993,419 $594,748,196 $140,760,399 $0 $0 $0 $318,492,412 $86,815,072 $146,859,140 $444,161,431 $163,659,552 $127,537,840 $0 $166,299,426 $812,491,068 $1,113,486,188 $298,630,444 $275,151,481 $117,449,753 $312,227,176 $165,297,390 $398,736,989 $62,366,417 $677,778,631 $511,318,614 $406,776,586 $575,610,813 $942,738,313 $353,011,485 $855,544 $223,186,052 $429,670,283 $262,817,931 $372,167,393 $129,941,073 $697,348,833 $155,768,112 $50,514,968 $114,718,262 $0 $1,580,167,391 $426,944,446 $140,534,735 $0 $183,916,602

January 2015 - PIPELINE 61

The Top 300

163 WA 164 MA 165 AZ 166 MN 167 WA 168 NE 169 MO 170 CA 171 SC 172 GA 173 FL 174 VT 175 CA 176 WA 177 SD 178 PA 179 KY 180 IN 181 NY 182 CA 183 MI 184 MO 185 VA 186 MT 187 FL 188 SC 189 MA 190 CO 191 CA 192 IN 193 OR 194 MA 195 CA 196 PA 197 MI 198 OH 199 NC 200 CA 201 IN 202 AZ 203 IN 204 TX 205 NY 206 DC 207 FL 208 OH

Columbia Workersâ&#x20AC;&#x2122; Vantage West Mayo Employees Verity Centris Anheuser-Busch Employees First Entertainment Founders Robins MidFlorida Vermont State Employees Ventura County Gesa Dakotaland Franklin Mint L & N Centra CFCU Community SF Police Michigan Schools and Government First Community Dupont Community Whitefish Tropical Financial Sharonview Rockland Credit Union of Colorado Point Loma Indiana Members Unitus Community Greylock CoastHills American Heritage Community Financial General Electric Allegacy Christian Community 3Rivers TruWest Evansville Teachers Shell AmeriCU Congressional Achieva Seven Seventeen

62 PIPELINE - January 2015

$77,701,641 $75,468,900 $74,094,022 $73,672,075 $73,566,587 $73,398,753 $73,098,804 $72,786,322 $71,566,933 $71,552,536 $70,940,194 $70,863,434 $70,515,751 $70,041,544 $69,848,548 $69,404,107 $69,081,157 $68,158,685 $68,105,773 $66,862,507 $66,731,469 $66,723,612 $66,635,066 $66,361,820 $66,303,761 $65,734,377 $65,280,810 $65,055,001 $64,983,961 $64,692,092 $64,260,186 $64,071,611 $63,597,134 $63,514,807 $63,349,906 $63,154,303 $61,945,153 $61,788,563 $61,655,795 $61,055,172 $61,050,976 $60,537,934 $60,521,695 $60,398,099 $59,718,038 $59,356,764

359 332 311 409 337 499 395 172 2,279 522 325 533 222 403 670 274 501 389 395 167 387 441 436 416 254 427 230 400 147 416 311 359 292 313 351 326 408 119 371 221 587 493 454 193 304 528

$326,618,081 $456,107,951 $236,690,297 $103,493,551 $141,060,310 $175,910,116 $377,986,859 $330,787,097 $620,231,361 $303,041,763 $607,628,484 $262,120,570 $145,287,445 $232,886,583 $87,887,114 $201,772,643 $361,254,955 $306,850,625 $378,915,647 $298,900,804 $463,906,363 $358,037,523 $427,659,952 $546,493,728 $199,094,519 $489,558,989 $366,170,790 $242,378,843 $178,369,790 $377,460,922 $182,795,299 $450,309,133 $325,002,501 $377,686,858 $251,544,712 $389,361,064 $236,504,712 $431,872,718 $235,576,953 $254,449,034 $318,111,755 $133,493,289 $262,428,904 $193,004,421 $210,545,833 $278,922,164

$43,258,670 $25,082,711 $7,970,660 $0 $41,757,000 $42,853,850 $29,924,222 $10,375,075 $0 $33,698,397 $64,954,105 $34,873,860 $12,730,223 $26,817,724 $19,730,914 $85,148,996 $1,267,011 $19,000,100 $7,708,481 $0 $0 $8,735,307 $12,610,247 $0 $31,615,658 $766,500 $28,628,384 $28,006,095 $0 $18,813,005 $41,022,128 $22,043,459 $5,427,150 $104,454,144 $21,207,472 $2,376,325 $34,935,995 $7,736,250 $18,466,912 $25,174,341 $15,824,040 $21,858,057 $30,094,199 $10,458,815 $17,967,572 $4,782,085

$153,631,391 $182,905,167 $0 $0 $277,361,028 $238,416,823 $299,534,247 $97,853,454 $0 $266,156,176 $386,949,160 $346,172,812 $6,595,822 $293,333,577 $136,288,228 $402,533,443 $169,512,640 $152,701,004 $167,880,025 $0 $7,883,672 $550,980,469 $7,718,837 $0 $213,111,419 $16,892,449 $125,572,037 $130,791,430 $17,128,018 $27,877,584 $381,100,790 $433,136,000 $98,290,555 $814,337,725 $197,061,420 $0 $220,678,133 $84,145,793 $216,416,990 $24,452,462 $91,467,034 $99,599,789 $226,825,308 $0 $128,675,519 $0

The Top 300

209 CO 210 OK 211 IN 212 CA 213 OR 214 NE 215 MA 216 MI 217 CA 218 WI 219 MA 220 TX 221 WA 222 UT 223 MI 224 IL 225 CO 226 TX 227 WA 228 SD 229 TX 230 TX 231 WI 232 FL 233 MA 234 ND 235 IN 236 WA 237 SC 238 WI 239 MD 240 TN 241 TX 242 IA 243 WA 244 AL 245 VA 246 CO 247 MI 248 MN 249 MN 250 NY 251 CO 252 TX 253 HI 254 UT

Public Service Employees $59,332,604 TTCU $59,329,265 Indiana University $59,289,784 USE $59,184,988 Oregon First Community $59,038,269 Liberty First $58,958,297 St. Anne’s Of Fall River $58,825,768 Lake Trust $58,724,671 Southland $58,217,100 Westby Co-op $57,807,525 Harvard University Employees $57,633,117 First Community $57,630,730 School Employees Credit Union Of Washington $57,543,053 Deseret First $57,309,310 Genisys $57,258,715 Abbott Laboratories Employees $56,843,299 Westerra $56,841,571 United Heritage $56,234,140 TwinStar $55,845,518 Black Hills $55,822,502 Texans $55,646,533 Austin Telco $55,472,843 CitizensFirst $55,402,813 Campus USA $55,120,620 Align $53,730,115 First Community $53,484,329 Interra $53,241,244 Solarity $52,825,742 South Carolina $52,490,175 Thrivent $52,319,850 National Institutes of Health $51,321,703 Knoxville TVA Employees $50,308,079 Firstmark $49,850,574 Community 1st $49,588,942 Salal $49,526,776 America’s First $48,897,448 University of VA Community $48,674,930 Aventa $48,625,417 Educational Community $48,600,216 Spire $47,926,975 US $47,844,530 Municipal $47,676,222 Air Academy $47,571,043 FirstLight $47,105,653 Hawaiian Tel $46,973,750 University First $46,942,845

307 434 374 270 365 428 253 360 184 496 149 299 454 291 339 264 290 325 309 299 414 302 464 510 200 250 304 343 320 383 155 652 483 458 147 440 417 188 376 344 296 196 237 281 113 383

$151,232,065 $175,455,250 $325,449,975 $242,357,579 $216,885,022 $60,255,168 $411,534,745 $518,720,514 $155,312,491 $140,535,551 $208,930,399 $175,984,858 $109,427,602 $121,623,740 $342,415,381 $167,744,193 $385,641,645 $306,524,992 $126,008,908 $278,884,936 $226,447,273 $274,170,040 $317,284,176 $304,712,194 $215,484,586 $190,283,376 $251,706,830 $172,286,713 $353,486,774 $182,277,901 $162,514,635 $401,476,435 $295,187,687 $233,244,966 $100,058,570 $368,537,166 $93,405,345 $26,165,194 $184,513,706 $197,651,651 $295,324,159 $569,844,013 $119,841,134 $212,633,882 $184,750,572 $101,733,250

$33,151,543 $39,110,797 $9,848,821 $32,163,305 $25,487,614 $39,082,167 $22,548,731 $0 $32,806,150 $9,121,903 $12,411,988 $19,859,141 $0 $33,077,100 $4,961,244 $21,027,900 $13,363,906 $15,953,385 $53,234,157 $5,860,119 $10,111,373 $0 $15,209,564 $12,578,975 $16,421,180 $12,203,106 $2,592,405 $32,358,162 $11,386,475 $29,678,746 $24,366,115 $6,724,856 $0 $7,897,574 $26,931,381 $5,879,220 $19,930,342 $47,376,980 $16,081,018 $21,769,439 $0 $0 $32,266,380 $9,644,896 $12,632,250 $23,752,600

$208,014,828 $159,416,414 $15,178,881 $131,028,897 $246,838,676 $0 $320,267,399 $26,871,054 $122,538,658 $129,945,671 $130,584,269 $89,606,693 $0 $0 $44,395,617 $0 $155,776,974 $2,851,007 $215,526,198 $0 $5,614,590 $0 $141,698,497 $58,212,624 $177,402,430 $0 $0 $147,568,623 $115,095,563 $345,880,528 $329,013,773 $0 $0 $0 $214,288,514 $0 $0 $62,790,777 $103,646,566 $0 $0 $34,666,985 $0 $86,924,435 $0 $197,583,185

January 2015 - PIPELINE 63

The Top 300

255 MI 256 VA 257 KS 258 AL 259 IA 260 OH 261 NC 262 ID 263 MI 264 LA 265 TX 266 NH 267 MO 268 CA 269 IL 270 TX 271 CA 272 NY 273 CA 274 WA 275 SD 276 CA 277 OR 278 CA 279 OR 280 MA 281 FL 282 TX 283 CA 284 WI 285 OR 286 CA 287 CT 288 IL 289 UT 290 VA 291 NM 292 WA 293 IL 294 NY 295 OR 296 CA 297 MA 298 CA 299 MA 300 IA

Dow Chemical Employees Chartway Heartland Listerhill Linn Area KEMBA Financial Self-Help Potlatch No 1 Honor Campus Members Choice Service Missouri America’s Christian Selfreliance Ukrainian American A+ Credit Union of Southern California Island Los Angeles Global Sioux Falls Uncle Oregon Community Los Angeles Police Selco Community Hanscom Pen Air Texas Tech San Francisco Connexus Rogue Farmers Insurance Group Connecticut State Employees Consumers Cyprus BayPort U.S. New Mexico Sound IH Mississippi Valley USAlliance OSU Kern Schools St. Mary’s Educational Employees Merrimack Valley DuTrac Community

64 PIPELINE - January 2015

$46,841,849 $46,784,643 $46,642,458 $46,380,207 $45,811,658 $45,435,853 $45,387,550 $45,236,148 $44,736,439 $44,398,672 $44,040,238 $43,910,281 $43,882,158 $43,658,712 $43,514,080 $43,467,298 $43,384,820 $43,380,400 $43,315,131 $43,244,337 $43,181,120 $42,992,936 $42,979,727 $42,926,342 $42,850,482 $42,838,311 $42,823,561 $42,810,016 $42,754,072 $42,502,326 $42,427,874 $42,391,958 $42,247,717 $42,214,093 $42,201,252 $42,024,736 $41,893,524 $41,880,330 $41,663,905 $41,499,326 $41,464,394 $41,391,750 $41,019,587 $40,995,311 $40,959,914 $40,947,671

344 292 763 1,156 320 370 323 316 454 153 115 232 400 86 130 313 115 178 159 273 282 96 252 158 181 175 250 263 100 231 275 101 351 220 255 218 220 243 285 77 210 218 170 320 178 310

$357,380,430 $255,957,833 $92,080,510 $218,006,645 $82,726,888 $257,406,426 $264,422,836 $85,094,391 $208,602,217 $165,355,390 $145,725,007 $472,617,813 $39,387,966 $160,321,880 $186,930,525 $177,005,112 $221,388,476 $188,616,584 $253,684,981 $71,902,181 $13,741,879 $101,592,437 $204,692,780 $247,124,086 $251,011,555 $221,255,866 $174,122,659 $15,947,492 $292,537,245 $181,565,402 $196,191,939 $187,446,890 $254,362,756 $120,901,470 $125,530,762 $395,401,148 $159,910,043 $196,548,356 $163,103,899 $239,262,407 $176,089,396 $317,527,693 $261,115,665 $233,296,412 $146,690,231 $202,622,323

$322,700 $27,871,972 $14,405,121 $1,104,916 $16,154,814 $10,079,752 $0 $40,114,183 $19,765,600 $4,177,110 $0 $0 $35,091,452 $442,500 $0 $5,697,516 $5,324,575 $10,605,300 $1,317,100 $31,501,848 $42,819,560 $0 $0 $7,619,350 $0 $26,377,817 $7,624,285 $35,355,356 $0 $9,562,656 $17,173,821 $2,527,220 $0 $16,909,498 $13,968,525 $4,317,180 $10,955,749 $15,695,172 $25,433,221 $10,691,888 $25,320,668 $7,532,300 $15,011,072 $0 $10,930,381 $16,574,369

$24,418,932 $103,845,682 $0 $0 $0 $17,623,535 $0 $281,347,949 $235,397,684 $0 $0 $0 $396,979,103 $167,040,522 $0 $0 $57,628,028 $154,831,288 $290,000 $2,042,781 $0 $0 $0 $200,029,613 $0 $231,844,655 $28,994,079 $0 $0 $30,926,690 $3,485,436 $0 $0 $276,900,889 $0 $0 $0 $0 $322,893,726 $213,846,082 $227,336,691 $238,681,745 $77,533,409 $0 $168,916,413 $0

“An exceptionally challenging mortgage industry demands THE RIGHT TOOLS.” As fast as the mortgage industry is changing, so are the tools to help us compete. From an online mortgage application for members to the latest in business-tobusiness platforms, CU Members Mortgage is dedicated to providing credit unions with technology for better lending programs, evolving to meet the market, and ensuring compliance every step of the way.

The market doesn’t stand still. Neither do we.

Randy Shannon, Vice President Correspondent Lending 28 Years in Mortgage Lending

www.cumembers.com

800-607-3474 Extension 3225

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