The House That Plastic Built

How Northwest Community Credit Union created a home equity product that offers members the last home loan for which they’ll ever need to apply.

In early 2014, Northwest Community Credit Union ($1.1B, Eugene, OR) was faced with a shrinking home equity loan portfolio despite an improving interest rate and housing market. Payoffs of the existing portfolio substantially outnumbered the number of newly originated home equity loans and lines. Members were inquiring about home equity opportunities, but sales staff reported members were going with other financial institutions for myriad reasons.

NWCU needed to refresh its home equity product offering, make it relevant to the membership, and be a best-in-breed product.

Our brand promise is to provide members with high-value financial tools to manage their wealth, says John D. Iglesias, president and CEO of Northwest Community Credit Union. We won’t put out a new product without doing a deep-dive into what is important to our members: What are their needs with a particular product? How can we provide a product experience that both benefits the member and differentiates us in the market?


Northwest Community Credit Union
Data as of 06.30.16

HQ: Eugene, OR
MEMBERS: 107,284
12-MO LOAN GROWTH: 17.5%
ROA: 0.51%

A year earlier, NWCU’s rollout of its unsecured Visa product was a success in large part because of the card’s robust rewards plan and the credit union’s targeted marketing to core credit union plastic users.

So when the credit union developed a Home Equity Rewards Visa, it recognized it needed to differentiate the HELOC from competitors in the areas of functionality, benefits, and risk assessment.

Meeting Member And Institutional Needs

In the past, NWCU had relied heavily on strict underwriting and risk positioning at 80% loan-to-value or less. This was largely due to a lagging housing market in the Pacific Northwest after the 2008 housing recession.

Russ Bernardo, Director of Mortgage Lending, Northwest Community Credit Union

Russ Bernardo, Director of Mortgage Lending, Northwest Community Credit Union

But by 2013, housing values in Oregon and southwest Washington had turned the corner, and consumer demand for access to home equity had improved substantially. NWCU’s members wanted quick and easy access to their newly found home equity for uses most likely put off during the several years of a tough economy.

Northwest Community Credit Union’s home equity loan includes a reformulated and expanded LTV criteria matrix, allowing well-qualified borrowers to leverage up to 100% of their current equity. Additionally, the credit union has lowered minimum payment requirements to 1% of the current balance, allowing for more affordable payments, and eliminated cash advance fees to encourage additional card swipes for larger ticket items.

We want our members to use the card for any expense they feel comfortable using a home equity line of credit for, Iglesias says. For example, if they want to purchase lumber for a new home deck project, they can use the card at their local hardware store, free of any fees.

Northwest Community Credit Union also worked with its rewards vendor to link the home equity card’s rewards points and benefits with a member’s NWCU consumer credit card’s rewards and benefits and allow members to pool their rewards points.

Finally, the credit union devised a way to help members feel comfortable using a variable-rate product. NWCU gives members the ability to lock in a fixed rate on a minimum $5,000 advance at prevailing fixed rates for a $95 fee per lock occurrence.

The combination of rate and rewards has given members the comfort of knowing they can convert to a fixed rate in the future if they wish.

NWCU’s chief lending officer, Bill Woods, points to these concerns as being part of the detail that went into building the product. Historically, much of the credit union’s membership base had expressed reluctance to use variable rates with its home loan product set, so NWCU wanted to give members the ability to lock in a rate to alleviate fears in a rising interest rate market.

Anytime you have members accessing additional credit they were originally approved for, those loan dollars are originated at a fraction of the cost of a newly originated loan.

Stemming The Tide And Growing The Portfolio

The product has been wildly popular with members since its inception, and NWCU has solved its problem of a shrinking revolving home equity portfolio.

For 2016, the credit union has grown its HELOC portfolio 24.2% through Aug. 31, and existing issued credit card usage has improved 10% in the past year.

Anytime you have members accessing additional credit they were originally approved for, those loan dollars are originated at a fraction of the cost of a newly originated loan, Iglesias says.

The new rewards product has also helped overall home equity production. Since the rollout of the Home Equity Rewards Visa, average home equity unit funded per month has increased 132%.

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Results Two Years Later

The revamped home equity offering has bolstered NWCU’s non-interest income through improved interchange and lock-in fees. It has also shifted NWCU’s HELOC portfolio to a variable-rate, which the credit union’s ALCO committee and board can manage for long-term interest rate risk.

Another welcomed result is the continued low delinquency of the new product set.

We have seen little to no increase from our mature product set to the newer products we have rolled out the past two years, Woods says. That proves to us we are using good underwriting and risk evaluation methods to deliver a relevant product to our members.


The roots of success with this product for Northwest Community Credit Union lie in listening to what members wanted. NWCU found it could expand and differentiate its home equity offerings without too much risk and given the good market timing.

By giving members a way to manage larger purchases, NWCU can provide the last home loan for which a member might need to apply.

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Russ Bernardo is the director of mortgage lending at Northwest Community Credit Union.

February 3, 2020

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