Member First Mortgage LLC, 4398 Roger B. Chaffee Blvd., was formed in September 2001 as a full-service mortgage company owned by Steelcase Employees Credit Union, LSi Credit Union and Bay Winds Federal Credit Union of Charlevoix.
Steelcase Employees Credit Union has 17,000 West Michigan members. LSi has more than 18,000 members and serves employees of more than 500 organizations in metro Grand Rapids.
Bay Winds Federal has 9,800 members and serves people in Antrim, Charlevoix and Emmet counties. Community Choice adds 39,000 new members, upping Member First’s client base to 137,000 statewide.
A mortgage CUSO is a subsidiary company that can be set up and cooperatively owned by several credit unions. A CUSO has to do 51 percent of its business with its owners and affiliated credit unions, but the remaining 49 percent of its business can be drawn from nonmembers.
Since its opening in February this year, Member First has offered first mortgages for home purchase, refinance and new home construction not only to members of its partner organizations, but also to affiliated credit union members and the general public.
Member First does a number of mortgage transactions every month with nonmembers, many of whom choose to join a credit union in the process because they see the value of it, said Cory Mackwood, Member First president and CEO.
Besides its partner credit unions, 10 other credit unions have affiliated with Member First since February, among them Tri-Cities Credit Union in Grand Haven, Shoreline Federal Credit Union in Muskegon, Newaygo County Service Employees Credit Union in Fremont, Battle Creek Employees Federal Credit Union, Grand Rapids Consumers Credit Union and, more recently, Kent County Employees Credit Union.
All the profits generated by the CUSO are returned to the owner credit unions, so the money stays within the credit union system and is used to support other credit union operations, he explained.
Three more credit unions, whose identities Mackwood wasn’t at liberty to reveal, may be coming on as owners over the next several weeks.
Affiliate credit unions don’t share in the risks associated with owning the company, so they don’t share in the profits. Affiliates are typically smaller credit unions that often aren’t able to provide first mortgage lending in a way that would be competitive with local banks and mortgage companies, Mackwood explained.
By affiliating with a mortgage CUSO, the clients have access to competitive mortgage lending services, and they are compensated for their level of involvement in the mortgage process.
There are three levels of involvement, and the more involvement an affiliate has with the application processing, the more compensation it gets from Member First, he said.
“Credit unions can do as little as referring members to us directly to as much as being involved in the entire mortgage process. The more they are involved, the more compensation they receive per loan. Most credit unions choose to be somewhere between the lowest level and the highest level.”
Mackwood said smaller credit unions, in particular, have to worry about losing members. So they need to be very concerned about their members taking out mortgages from competing financial institutions that provide other financial services, as well.
“When a member gets their mortgage from a financial institution competitor, they will likely end up taking more products and services from them.”
Since Member First is a single-use CUSO, strictly involved in first mortgage lending, it doesn’t cross-sell any other products to affiliate’s members.
“They know their member will only be getting a mortgage from us. So their member penetration remains stronger when they have a CUSO,” he added.
Member First opened nine months ago with one part-time and four full-time employees. As of last week it had four part-time and 11 full-time employees. The company expects to increase its employment base another 20 percent to 40 percent by next summer.
The company also has already outgrown its present facility and is looking for a larger one in Grand Rapids.
Mackwood said in the near future Member First will likely establish some real estate-based companies to support the CUSO’s activities, expanding from just mortgage services to some complementary, real estate-based services for members.
It’s not the strong mortgage market that has spurred the company’s growth, but the addition of new owners and affiliates, he said.
“We’re one of the few companies that are aggressively hiring because of that,” he remarked. “We’re a small company, but one of the fastest growing companies in West Michigan. And a lot of the business we’re picking up is outside of the Grand Rapids market, so we needed to staff up in Grand Rapids.”
Member First’s involvement in other markets in Michigan makes its West Michigan market stronger because a lot of the work is done at the company’s corporate office in Grand Rapids, so this is where the employment opportunities typically arise, he said.
The company has one employee in Livonia and will hire a few more to cover various geographic areas where its partner and affiliated credit unions are located.
Members can apply for a mortgage face to face, online and by telephone. Right now, members use all three methods about equally, Mackwood said.
But he expects online activity will grow.
Most mortgage CUSOs in Michigan were founded about 10 years ago, when technology was different.
“The fact that we built this in the last year gives us a huge advantage because we built it using today’s technology. Our technology is far superior to anybody else’s in the state.
“Our technology can be taken anywhere. You could fill out an application on your PDA on a beach in Cancun if you wanted.”
Applicants can get not only pre-approval, but a complete credit decision — subject to an appraisal — within about 20 minutes, Mackwood said.