Written by Ginger Ellis, Members Mortgage Services, Vice President of Sales and Marketing gingere@mms.coop | 1.866.441.4447 ext. 273 | mms.coop
For most Credit Unions, the secondary market remains a relatively small part of the mortgage strategy. Many continue to retain
most of their mortgage production, while others use the secondary market when liquidity, capacity or balance-sheet considerations require it.
But the question should not simply be, “Should we sell our mortgages?” It should be,
“What is the right mix of loans in portfolio versus sell?”
That distinction can change how leadership approaches mortgage lending.
Mortgage Is More Than an Asset
A mortgage creates value in several ways. It can generate interest income when retained, while selling can create liquidity and fee income. When done right, whether you portfolio or sell, the mortgage should continue to deepen the member relationship.
A Credit Union’s decision should consider liquidity, capital utilization, funding costs, interest-rate and credit risk, concentration, servicing value, member relationship value, secondary-market execution and operational capacity.
“Portfolio Some, Sell Some”
For many Credit Unions, selling mortgages is not an everyday production strategy. It is an overflow valve. Credit Unions do not have to choose between being a portfolio lender or a secondary-market lender. A hybrid strategy can provide greater flexibility.
A Credit Union could establish guidelines for loans it prefers to retain based on product, term, yield, loan size, credit characteristics, duration and geographic concentration.
Loans outside those parameters could be candidates for sale. This creates a repeatable strategy rather than a reactive, file-by-file decision. The Credit Union knows what it wants on its balance sheet—and has a plan for everything else.
Secondary-Market Capacity Is a Strategic Asset
The ability to sell a mortgage has value even when it is not used regularly.
When deposits do not keep pace with mortgage production, or loan-to-share ratios approach a strategic limit, selling mortgages can create needed capacity. But establishing a selling channel takes time. Pricing relationships, contracts, technology, processes and quality controls all need to be in place.
That is why secondary-market capacity should be viewed as a strategic capability—not an emergency measure.
The best time to determine how a Credit Union can sell more mortgages is before it needs to.
Choose a Strategic Selling Partner
When selecting a selling partner, price should be only one consideration.
A mortgage CUSO such as Members Mortgage Services can provide capabilities that may be difficult or expensive for an individual Credit Union to build, including:
- Secondary-market execution
- Mortgage technology
- Operations and fulfillment
- Servicing and loss mitigation
- Compliance support
- Vendor management
- Data integrations
- Quality control
The value is not simply having somewhere to sell a loan. It is having a strategic extension of the Credit Union’s mortgage operation—one that can provide capacity while the Credit Union maintains its focus on the member.
Sell the Asset—Keep the Relationship
One of the strongest arguments for retaining a mortgage is member retention. But ownership of the mortgage and ownership of the member relationship are not necessarily the same thing.
By strategically structuring the selling and servicing relationship, Credit Unions can create liquidity and lending capacity while maintaining meaningful connection points with borrowers and protecting their rights to and access to borrower data.
The goal is not simply to sell more mortgages. It is to create flexibility to serve more members while protecting the relationships and data that make Credit Unions unique.
A strong mortgage strategy gives a Credit Union options: portfolio the loans that make sense, sell loans when factors favor. Use a trusted partner where needed, which means the member relationship is always maintained.
Members Mortgage Services helps you maintain the relationship with your members throughout the loan process and after closing, while providing a full array of mortgage products; a customized, best-in-class mortgage origination experience; access to the secondary market with co-branded servicing; and protected portfolio loan sub-servicing.
Members Mortgage Services, LLC is a Midwest mortgage CUSO licensed and authorized in Nebraska, Kansas, Missouri, Iowa, Oklahoma, Arkansas, Colorado, Illinois and Texas. NMLS #760008. Equal Housing Lender.
