Industry News
June 16, 2009
Credit Union Expands Escrow Services On-Line
Los Angeles Firemens Credit Union said it launched a new Web site for Pacific West Escrow early this month, and expects to spin off the escrow company. The Los Angeles-based credit union said it will move forward with its plans to launch a Web site for its wholly owned escrow company.
Los Angeles Firemens Credit Union, which reportedly originates more than $100 million in loans per month, said it launched a new Web site for Pacific West Escrow early this month, and expects to spin off the escrow company, officially owned by LA Fire CU Holdings LLC, as a credit union service organization owned by a group of credit unions.
The escrow company came into full operation in January 2008 to bring LAFCU’s business completely in-house. The credit union had its own internal escrow unit for refinances but was sending purchase escrows to a third party.
A lack of control over the quality of the transaction and revenue potential were the primary reasons behind the investment, said Richard Romero, Pacific West president/chief operations officer at the credit union.
Romero said the new company has struggled because of the poor economy, but that it is positioned to expand once the market recovers. He said many Southern California escrow companies have gone out of business since the real estate market crash, leaving the field wide open. Pacific West Escrow is approved by California’s Department of Corporations, which regulates escrow companies.
Though Pacific West currently only provides escrow services for mortgages originated at LAFCU and credit union members, as an owned entity of the credit union’s holding company, it can process escrows for other credit unions. LAFCU’s employment charter also reassures potential credit union clients that it won’t steal or cross sell members, Romero said.
“In a time of cost cutting, if a credit union is paying staff to process escrows, they could divert that resource to us and use that person to fill more function that’s of more value to the credit union,” he said.
Romero said he has received interest from other credit unions to process escrows, but HUD policies prohibit escrow providers from paying an incentive to lenders. That makes it difficult to lure a credit union from its current escrow provider because Pacific West doesn’t have much to offer besides safety, soundness and service.
