CUs in Good Position to Capture More Mortgage Loans Now and Later When Market Cools

The unfortunate fact about those nice homes your members live in is they most likely got their mortgage money from somebody other than you. It’s time to change that. Last year, credit unions originated a meager 2.5% of all first mortgage. Also consider that 48% of member households have a mortgage loan, and only 7% are through a credit union. So the opportunity for major growth is out there. Rates are hovering at 40-year lows and mortgage origination volumes are continuing to reach record levels, so now is the time to develop a plan that will make your credit union front of mind for your members’ mortgage loans. And that strategy will still be valid when today’s low rates eventually creep upward. Mortgages are the cornerstone of a solid, long-term Primary Financial Institution (PFI) relationship between a borrower and a financial services provider. It’s often the single largest financial transaction an individual will undertake in their lifetime. So, it serves to everyone’s advantage – members and credit unions – to take the action needed to capture this life event. Perhaps the best way to determine if your mortgage program is the best it can be is to take a close look at your current mortgage partner to see if it’s a good fit. If you’re not making mortgage loans yet, now is the time to look for an organization that will help you get into this important lending area. Some factors to look for in a partner include pricing, capacity to serve your needs, full range of products and services offered, their secondary partners for selling loans, experience in the marketplace, and, most importantly, an organization that won’t cherry pick and steal your best members and their assets. To effectively compete, your mortgage program needs to be the best in the marketplace. Take a close look at what you have. How’s your pricing? Are you getting the most for your money? Can you and your partner handle your business now? What about when you gear up your marketing efforts? Can you customize your program to retain the services you want and contract for others? Can you readily sell the loans you need to? Is your partner experienced or new to credit union mortgage lending? Are you able to seamlessly continue your tradition of high-touch customer service? Does your partner offer any exclusives? Is your partner competing against you by selling financial products and services? If you’re preparing to enter mortgage lending, your partner must be able to tailor their services to exactly meet your needs. There are programs available to credit unions of every size. An effective strategy for reminding members of your mortgage lending ability is to train your staff to cross-sell. A member seeking a consumer loan, for example, can be told about your home equity loans, which leads to questions about their mortgage and how a refinance with you might save them money. Reward your staff for making referrals. Ask your members for referrals to friends and family, so they can get a good deal, too. Sure, it’s difficult to plan for a downturn in mortgage lending when your originators are already busy, processors are buried under a crush of applications, and servicing managers are scrambling to manage payoffs and load new loans into the system. Freddie Mac says that in March, the industry saw the refinance share of mortgage applications set a record high of 79 percent. At the same time, borrowers are more educated than ever before about the mortgage process and their service expectations are higher than ever. Add to this mix the power of the Internet, with its limitless information on products, programs, and pricing. You need to be as knowledgeable as your members and prepared to satisfy their needs, or they’ll go to the competition. Credit unions are uniquely positioned to transition from a refinance to a purchase market. They’ve traditionally scored high on satisfaction scores relative to other financial services firms, with “trust” and “service” ranking at or near the top. Where other mortgage providers have to spend time and money trying to attract customers, credit unions simply have to remind their members what mortgage programs are available to them, conveniently at their familiar branch office, or a click away on their computer. As for lending technology, take a look at your infrastructure and your systems. Often overlooked when things are running at full-steam, determine if they’re adequate. Or would newer technologies better serve you and your members? Partnered or in-house call centers, for example, are another option for taking loan applications and answering questions, freeing up your internal staff to handle members’ urgent or more complex needs. Review your Internet presence – often the first impression a member or potential member has of your organization and its quality. You can easily have installed online lending forms, calculators, chat functions, and instant loan approval to your Web site. But be careful. Simply automating an existing process may not result in any significant time or cost savings. Rather, new ways of fulfilling transactions is the key to differentiating your offering. Amazon.com, for instance, is not the only online site for books, nor is it the largest. But they have differentiated themselves through service, convenience, customization, and fulfillment. They have designed a better way to buy books by refining their processes. Mortgages are no different. Credit unions must look at their mortgage operations to ensure they are as efficient as they can be. To begin, define and document each step of the process, identifying what each step should be, and identifying all inputs (including partners) and outputs (members and their expectations). With this, you’ll be able to determine which steps can be improved or eliminated. Don’t wait until the market cools before you look for inefficiencies. Your members will spot them now and leave. Make sure your products and services are current and consistent with what your members and potential members are demanding, along with competitive pricing. Be prudent with your product menu and don’t stretch to be all things to all members. Rather, seek a broad selection that appeals to most members’ needs. Many credit unions hold regularly scheduled home-buying seminars for first-time borrowers. They’re a perfect opportunity to assess their needs and to pre-qualify them so they won’t stray. Be attuned to changing demographics of your membership and the accompanying cultural needs, too. Your counseling can make it a smooth process that will open the door for more of their financial business. You have a tremendous opportunity to grow your mortgage business, which in turn will keep members loyal and using more of your services. As the first mortgage and re-fi market inevitably cools, the proper product mix, member service, and marketing strategies will keep your lending operations hot.