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Credit Unions Scramble Following Lender's Collapse

CU National Mortgage halts operations

February 17, 2009


A company that handled mortgage originations for more than 30 credit unions suddenly halted originations -- leaving its credit union customers scrambling to find alternatives for their pipelines of loans-in-process. A nearby competitor, however, is stepping in to provide help.

CU National Mortgage has notified its customers that it stopped processing loan originations.

An employee at GTE Federal Credit Union told that it was trying to find other sources of funding for loans in its pipeline after receiving correspondence from CU National stating it could no longer process loan applications.

The notice indicated that the Pine Brook, N.J.-based lender's warehouse line-of-credit was cut, its access to Fannie Mae as a delivery channel was lost and it was no longer able to use Fannie's Desktop Underwriter, according to the GTE FCU employee.

Fannie officials declined to comment, and CU National officials did not respond to phone calls.

Meanwhile, a direct competitor of CU National -- Credit Union Mortgage Alliance Network, or CUMAnet -- has begun to handle loans from some of the credit unions that relied on CU National, with its entire staff working through the three-day Presidents' Day holiday.

"We've already signed 11 of their clients with probably about 20 more expected," CUMAnet President Daniel von Schaumburg told "We also took over a lot of CU National's files and we're trying to sort them out by the stages they're in. Right now we have 130 of their loans but when we get all their files over here it could be anywhere from 250 to 336. Some are ready for closing. Some are very new. Appraisals weren't even ordered."

CUMAnet also has taken steps to hire eight to ten persons from CU National, von Schaumburg said, noting that the two companies -- with CUMAnet in Basking Ridge, N.J., and CU National about a half-hour away.

CU National, he estimated, served 30 to 35 credit unions while CUMAnet served about 50 credit unions before taking over some of CU National's accounts.

Because some credit unions "have no idea what's going on," von Schaumburg said his staff also is "trying to reach out" to every credit union that used CU National for its mortgage originations and "let them know what's going on. Some of them have no idea what's going on."

One credit union that was not aware of CU National's move until informed of it by was 825-member Shiloh of Alexandria [Virginia] Federal Credit Union.

Manager John Dupree Jr. told that while the credit union had other options, he did not think any other company could offer the services that CU National provided to Shiloh -- which often worked with low-income home buyers for as long as 12 months before they became qualified for a mortgage.

"I'm doubtful we'll find anyone to do what they did for us," he said. "It's a setback because of the relationship we had with them and how they helped us along, learning how to do a mortgage, and they did it responsibly. And they would close the loans in our name."

The value of this attention and patience, Dupree noted, has been demonstrated in the fact that they have not had a single foreclosure.

CU National was developed in 1998 as a subsidiary of then two-year-old US Mortgage Corp. to serve the mortgage lending needs of the credit union industry.

Jerry DeMuth is an award winning journalist who has been reporting for four decades.

e-mail Jerry at [email protected]
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