Key Steps to Mortgage Success for Credit Unions

Credit unions that successfully take hold of home lending business have huge potential for growth. In order to succeed, credit unions must do what many other lenders have failed to effectively deliver: Provide an excellent borrower experience. Customers have been ranking their mortgage loan experiences low in satisfaction, largely due to poor customer service. Credit unions can do better.

Yet, while credit unions have always been renowned for excellent member service, less than 10% of the mortgage loans written each year are sold by credit unions, according to CUNA and the Mortgage Bankers Association. Certainly, there is much to be gained for credit unions not only willing to pursue the mortgage market, but to also process these loans in-house rather than outsourcing them, and owning that member relationship.

Borrowers, too, have both needs and demands that must be met in order for credit unions to succeed in mortgage lending. Borrowers want the process to be simpler and easier for them to understand. They also want the process to be fast.

It won’t be enough for credit unions to attract more business if they aren’t adept at keeping their borrowers engaged throughout the process. When a borrower abandons the process, everyone loses. The credit union loses most of all because much of the money spent to close the loan is already gone by the time the application gets to underwriting. Too many loans don’t make it across the finish line and this costs credit unions money.

Implementing better marketing strategies can dramatically improve pull-through rates and many credit unions are putting them into production today. The bottom line is, credit unions are much better equipped to help their members navigate the mortgage process than many other lenders.

Finally, making money on mortgage lending requires the credit union to have an efficient operation. This applies to the origination process, but also to post-closing, quality control, secondary marketing and, if the credit union retains the rights, to servicing. Efficiency adds layers of cost to the transaction. This is mitigated with the right technology. Automation lowers costs.

Given that there are many benefits to increasing the mortgage lending business within a credit union, what must management consider in order to be successful here? There are five key elements that credit union management should focus on in order to create a thriving home finance business.

1. Differentiation

Studies indicate that consumers feel all lenders look essentially the same. They offer most of the same products from the same secondary market investors with pretty much the same rates and fees.

Credit unions that want to succeed in mortgage lending must consider ways to differentiate themselves in the eyes of their members. There are many ways to do this, but approaching it from the perspective of their existing financial services partner will be very effective. Accenture research indicated that member share of mortgage business is below 5% for most credit unions. That’s a lot of mortgage business waiting in your own member base. Vital steps to differentiate your credit union from other mortgage lenders include:

• Creating a mortgage program for existing members with a streamlined application;
• Installing a fully-integrated origination fulfillment system to increase the conversion rate and improve the entire mortgage loan process; and
• Offering new homebuyers an education class or partnering with a nonprofit.

2. Speed of Response

Today’s mortgage borrowers are making loan applications to more than one mortgage lender. When they do, research indicates they are inclined to go with the first company that responds to their request for information. Credit unions that use marketing automation have a real advantage here, but it is important that all staff are trained to respond quickly to a member’s request for information about a new mortgage. This seems like an easy thing to do, but most mortgage lenders do a poor job of it.

• Use marketing automation to automatically respond to website requests;
• Train all loan officers to respond quickly and track the metric;
• Crosstrain member service staff to offer basic mortgage information; and
• Use marketing automation to send leads to mortgage from other departments.

3. Member Service

One of the reasons customer satisfaction is so low in the mortgage lending business is because the transaction is so complex. The typical borrower can’t make sense of much of what the deal entails and signs most required disclosures without reading them. They can leave the closing table feeling manipulated. In home finance, customer service is largely hand-holding and educating. When borrowers understand what they are signing, they have less remorse. This results in higher levels of customer satisfaction reported after the loan closes. Credit unions do not have a lot of competition here, and can make a real difference by:

• Creating a new mortgage welcome packet that goes to each new applicant;
• Training loan officers to provide a checklist of “things that will happen” for borrowers;
• Using marketing automation to set up frequent information updates for borrowers; and
• Cultivating business referral partners by demonstrating good member service.

4. Educational Material

Borrowers typically spend a lot of time online doing research before they are ready to make an application for a home loan. Credit unions that want to win more mortgage business should anticipate this by providing/offering educational material in the branch, on the website and available to members via email. If the borrower has to search elsewhere for loan information, they will likely make their application elsewhere. If the credit union already has an existing relationship with the member, it makes sense to provide that member with the information they are seeking. When they do, they significantly improve their chance of securing the member’s business.

• Use pre-built marketing messages and educational content for borrowers;
• Create simple brochures that explain the mortgage origination process;
• Respond quickly when borrowers request information online; and
• Use member activity tracking to know when a member is shopping.

5. Status Updates

Most lenders only close a fraction of the loans for which they receive applications. For many lenders, as many as half of the borrowers will abandon the process before the loan reaches the closing table. And this is for business that has already been pre-approved to close. Pull-through is a critical success metric that credit unions must monitor if they hope to succeed here. To keep members on track as they move through the origination process, it’s important to provide frequent status updates. This can be challenging as loan officers are generally already concentrating on the next borrower when the loan is in process, but marketing automation can make this easy.

Like any product or service offered by a credit union, mortgage lending takes focus and energy. There are a number of requirements that must be met in order to achieve success. Lending technology coupled with marketing automation makes much of this work simple, freeing up the credit union’s staff to focus on the needs of the client through the process.

In fact, we have found that lenders that use a single, unified platform for mortgage loan lead engagement and management, point of sale and fulfillment, such as our new Origence™ mortgage lending platform, are significantly more successful, enjoying up to a 40% increase in productivity and as much as a 75% higher pull-through.

Jeff Shood is President of CU Direct’s Intuvo Member Engagement Platform. He can be reached at jeff@intuvo.com.