Don’t Refi. Modify.

Low interest rates have ignited interest in refinances. At Star One, mortgage modifications build member loyalty.

Top-Level Takeaways

  • For decades, Star One has allowed members to change loan terms as long as the loan is in good standing.
  • The low-rate environment brought on by the COVID-19 pandemic reignited interest in modifications at the California credit union.

The interest rate for a 30-year fixed-rate mortgage has hovered around the 3.0% mark for six months, making this a desirable time to buy or refinance a home. Indeed, performance data from the second half of 2020 shows refinancing is soaring at credit unions. At Star One Credit Union ($10.0B, Sunnyvale, CA), though,modifications are more popular than refis.

California’s fourth-largest credit union by assets is headquartered in the heart of Silicon Valley. It holds its first mortgage originations on the books so it can offer competitive terms both at the time of origination as well as later in the lifeof the loan. For decades, Star One has modified the interest rate and monthly payments on active loans in good standing upon request, driving loyalty among members.

Victoria Tabler, VP of Real Estate Lending, Star One Credit Union

All in all, the credit union’s real estate modification program boasts a process that is easier and more member-friendly than a refinance, says Victoria Tabler, Star One’s vice president of real estate lending. And there’s no limit on the number of times a member can modify.

For example, rather than paying closing costs and other fees for a refinance, borrowers pay 0.5% of their outstanding loan balance with a minimum of $750 and a maximum of $1,500. The loan amount stays the same, the rate and payments go down, sothe credit union doesn’t have to reverify the borrower’s ability to repay, which cuts down on time and labor expenditure.

‘The process is easy,’ Tabler says. ‘A member submits a request through our website, we review and prepare a two-page modification agreement, the member provides a single signature, and we make the change.’

Star One lowers rates quickly and efficiently with its real estate modification program. Learn more in ‘Star One Builds Loyalty With Streamlined Modifications.

On the request, members provide their loan number, their desired interest rate and term, and an authorized form of payment, among other details. Star One’s rate tracker available on itswebsite allows members to view available rates and set an alert for when rates reach a certain threshold.

If a member wants to drop their interest rate lower than the available market rate, Star One offers an option for that, too. After the credit union confirms certain details, borrowers can buy down their rate.

A New Reality

Historically, Star One has not marketed its mortgage modification program. Instead, members learned about it through word of mouth or independent research. But along with nearly every facet of life, that changed when the novel coronavirus hit in March2020.


Star One Credit Union
Data as of 09.30.20

HQ: Sunnyvale,CA
ASSETS: $10.0B
MEMBERS: 112,741
ROA: 0.59%

Star One immediately instituted a robust mortgage deferral program and secured regulatory approval for drive-by appraisals. It also worked with its legal department to rethink documentation practices and reduce health risks, Tabler says.

Still, by mid-year 2020, the credit union started to see members, tempted by low rates, refinance their mortgages with other lenders. That’s when it decided to fully leverage its real estate modification program.

Don’t Refi. Modify.

Across the industry, refinancing became a tool for lenders to expand their portfolios. As rates steadily decreased, the interest in refinancing steadily increased.

Star One, however, retained its commitment to a five-day turnaround for modifications. The cooperative, after all, didn’t have to re-originate the loan, it just had to change the rate and payment. Competition did force the credit union to reduceits program fee to a flat $500, and for a time it even ran a promotional rate.

Star One started marketing its modification program first to members whose mortgage rates were higher than the current market rate. It also leveraged analytics to develop a trigger campaign that scored members based on the probability they’d movetheir loans. It called members likely to move based on information such as pay-offs to other institutions or credit pulls to retain the relationship before losing the loan to another lender.

A Bright Performance During A Dark Year

To accommodate the increased volume in modifications, Star One expanded its mortgage servicing team and provided additional training to branch staff. By the end of the year, it had processed more than 3,800 modifications totaling more than $1.8 billion a record year for both, Tabler says.

Retention is smart lending.

Victoria Tabler, VP of Real Estate Lending, Star One Credit Union

The credit union also set records in 2020 for new originations 2,800 for $1.3 billion.

Looking forward, Tabler expects member interest in mortgage modifications to continue, although she acknowledges the market will play a role. If rates continue to drop, she says, members will be likely to request modifications.

Regardless of future demand, modification activity in 2020 pushed the mortgage department at Star One to cultivate team relationships and enhance service skills. It also highlighted how important the department’s servicing arm is to the credit union.

And that won’t change any time soon.

‘You can turn your focus toward originating new loans and driving growth, but if you can’t keep those loans, you’re wasting time, money, and resources,’ Tabler says. Retention, on the other hand, is smart lending.’


February 1, 2021

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