Credit Unions Turn to Manufactured Homes for Interest Earning Assets

Friday, 31 July 2020

manufactured homeAccording to CUNA, many credit unions have reported rising liquidity and lower loan origination volumes over the past few months. As this trend is expected to continue particularly due to the current government relief programs as well as a higher number of people looking for a safe place to keep their money, it could negatively affect the overall profitability of many credit unions. 

In the current socio-economic context, finding new ways to turn excess liquidity into interest-earning assets has become extremely important for a credit union that wants to remain competitive in the market. While the low interest rates of conventional loans, which are expected to increase mortgage and refinance origination activities, might provide some return on investment, a credit union can gain access to a better investment opportunity; namely, manufactured home lending. 

Manufactured Home Loans: A Viable Way to Convert Excess Funds into Interest-Earning Assets

Unlike banks, which typically offer various types of loans to different categories of borrowers, including consumers as well as commercial and industrial borrowers, credit unions tend to focus more on consumer loans and member savings. But to maintain its economic viability in a competitive environment, a credit union should take into account the earning potential of the products it provides. 

Although most credit unions are making significant efforts to add high-quality loan products to their portfolios, only a few have focused on expanding their consumer financing activities. As a result, many of them are currently experiencing faster asset growth than loan growth. As this could put downward pressure on earnings, a credit union that wants to maximize its earnings potential should opt for different investment strategies than the ones it typically uses.

Manufactured home loans, for instance, provide an excellent investment strategy for credit unions. By adding manufactured home lending to its portfolio, your credit union will be able to offer its members a new category of loans, including chattel loans, conventional manufactured home loans with land, and refinance loans for manufactured homes. 

The manufactured housing industry addresses the needs of low- and moderate-income families, which are often excluded from conventional housing and mainstream financing. By offering manufactured home loans, your credit union will basically attract a new category of borrowers who intend to purchase a manufactured home. As a result, your credit union will be able to capture both wallet and market share.

In addition, a credit union that makes available manufactured home financing will be able to create more value for its members, deepen relationships, and generate more revenue. All these factors will allow your credit union to stay ahead of the competition.

What’s more, manufactured home lending is a very effective, low-risk investment strategy that can be used by your credit union to improve its loan-to-share ratio. When manufactured home loans are issued by experienced and trustworthy lenders, they provide some of the best performing indirect lending products. To deliver high-yield, low-risk portfolio solutions, for example, a manufactured home lender would only lend to creditworthy borrowers with high credit scores and low DTI ratios. The borrowers’ trustworthiness and income levels are two important indicators of future loan performance and potential risk of default.

While a credit union must have a well-designed lending program and investment strategy to compete with other financial institutions, the bottom line is that it needs to offer its members what they want. If you offer your members the products and services they’re looking for, they will do business with you. But if you ignore their needs, chances are they’ll get the loans they need from a competitor that offers better terms and conditions.

Nowadays, many hard-working Americans are looking for a way to fulfill their homeownership dreams. By adding manufactured home lending to your portfolio, you can help your members bring their homeownership dreams to life. Unfortunately, without a full understanding of the benefits provided by manufactured home loans, your credit union may miss out on many opportunities to create a stronger offering, build loyalty, gain market share, and drive profitably. To learn more about how you can make more members happy and boost your loan-to-share ratio by simply adding manufactured home lending to your loan portfolio, feel free to get in touch with our experienced financial professionals today! Contact us by email: investors@triadfs.com 

 

Tagged under: financial portfolio, Loan Portfolio Improvement Tips, Lender Tips, Credit Union Tips

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