How Lenders Can Better Serve Borrowers With Settlement Solutions
Solutions exist for CUs looking to expand their first mortgage business without making a large investment in staff or resources.
Interest rates are still at a historic low and housing demand has remained strong throughout the pandemic, leaving lenders struggling to loan money in a more streamlined and competitive process. This demand has morphed their supply level of employees, time and money. Lenders who leverage innovation and an open-minded settlement solutions strategy are doing more with less. Centralized pricing along with product innovation are critical factors of successfully competing, as well as serving and creating raving fans, for any lenders that want success in 2021 and beyond.
On the home equity side, there are lenders still haunted by the Great Recession who are paying for full appraisals instead of complimenting their services with automated valuation models (AVMs) and hybrids, which cost much less and are ideal for nearly 80% of the deals based on the amount of the loan and the risk associated with the borrower. The key lies in naming a risk tolerance strategy that allows the lender to choose the right product in relation to the components of the loan. Turn times factor into this process, where weeks can go by before the loan is completed. Once the risk tolerance strategy is defined, lenders can begin executing their campaigns can feel confident that a sizable percentage of them can be managed through the desktop.
Credit unions interested in expansion on the first mortgage side often seek a more cohesive process that allows them to transfer their underlying community culture to new regions. The question is, how can they get there? Centralizing the title process, with a title and settlement company that has established roots, allows for these credit unions to scale their operations to match their lofty sales goals. Critical components of the services credit unions should choose include transparent reporting, repeatable processes and set pricing, which helps delight clients and create competitive advantages for credit unions over larger institutions.
Expansion is sometimes thwarted by a reliance on a local title company that works well with Realtors on purchases, but may not offer the same consistency that credit unions have come to expect. Credit unions can continue to partner with local title companies and Realtors, however, to expand that piece of their first mortgage business. This two-pronged strategy aligns with both sides of the portfolio, keeping Realtor referrals with local title companies and developing a more cost-effective process for managing refis with a national title and settlement partner.
As credit unions look to expand when other lenders seem immobilized by excessing volume, staff reductions and a one-size-fits-all solution that takes too long and costs too much, they have options that will not go away during or after the pandemic. The immediate obstacle brought forth by the pandemic, for both borrowers and lenders, is how to sign and execute documents. Those that have overcome this challenge have sought out a partner that has expertise in remote online notary closings.
If the county in which the property is located allows electronic recordings, credit unions have options that they might not have considered. Look to a solution that is scalable so that service levels won’t change just because volume is higher or key employees are on vacation. Consider asking your partners to show you what they are doing. Remember, every loan matters. Once you find the right partner, make sure they are willing to partner with current or future loan origination system (LOS) partners and ask them for their written integration plan and technology team’s information.
The search for these types of partners need not be akin to finding a purple unicorn. Be honest with your pain points when interviewing a partner that is looking to help you innovate and has operational expertise. Be sure to ask them the following:
- Is the company challenging the status quo to significantly outperform industry standards?
- Can they show data that transparently shares performance, turn times and continuous improvement?
- Are they built to take on significant volume increases across your growing lending footprint that match your initiatives and goals?
- What are the processes the partner uses for the 10 to 15% of loans that have little challenge to them?
Credit unions have a unique opportunity to delight clients by getting things done faster and at a lower cost without having to hire additional staff. And, it seems likely the pendulum will once again turn toward home equity loans because so many homeowners have existing low rates through recent purchases or acquisitions.
Kyle Kauss is SVP of Strategy & Growth for Corporate Settlement Solutions (CSS), a provider of title software and an e-mortgage solution based in Traverse City, Mich.