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How Credit Unions Can Work the Secondary Market
Take Advantage of Opportunities
Participation in the secondary market offers some real financial opportunities for Credit Unions that are already engaged in mortgage lending or planning to offer residential mortgages to their Members for the first time.
There are a number of ways that a Credit Union may participate in the secondary market. A Credit Union needs to consider its available resources, loan volume and business strategy, and then identify its “best execution”– to sell mortgages to the secondary market in such a way as to maximize the revenue they derive from the sale.
1. Retail. Refer Members to business partners that close funds in their own name.
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Quickest way to enter mortgage lending, involves the least risk and cost |
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Credit Union can expand product offerings to membership base |
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Credit Union may be able to improve its financial performance |
2. Wholesale - Servicing Released. Originate and close loans in the Credit Union’s name and sell servicing rights for the loans (called “servicing released”) on a loan-by-loan basis to a secondary conduit.
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Credit Unions will have more control over loan transactions |
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Credit Unions will realize fee income immediately upon the sale of the loan |
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Sale of servicing limits responsibility for future management of servicing functions |
3. Wholesale - Servicing Retained. Originate and sell loans for cash or swap for securities as loans are originated, retaining the servicing rights.*
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Credit Union can realize servicing income over the life of the loan |
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Credit Union will have more control over loan transactions |
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Credit Union will retain ability to cross-sell to membership, due to maintenance and servicing of Members’ loans |
4. Bulk Transaction. Originate and close loans in Credit Union’s name, hold loans in portfolio and retain servicing rights, then sell seasoned mortgage loans from portfolios in bulk transactions.*
If you have a seasoned portfolio to price, we can bring in investors to price the portfolio.
*Requires a substantial commitment to mortgage lending. Credit Union must be willing to invest in adequate staff and systems. Loan volume must support investment.
For more information about these investors or the secondary market and how we can provide assistance, please contact your CMG MI Account Executive.
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