Mortgages Are Key to Member Retention – but Often a Missed Opportunity

The late American radio and television commentator Andy Rooney once remarked that opportunities are never really lost, only that “someone else will take the ones you miss.” As someone who specializes in marketing, I see this concept playing out every day in the financial services industry. And many credit unions have become perfect examples.

Credit unions measure themselves by how much of the member’s wallet share they retain. Yet they often pay little attention to originating mortgages, which is one of the best ways to increase wallet share and get members to make larger deposits. However, there is a pretty inexpensive and effective way to start changing the picture.

Why Mortgages Make Members ‘Stickier’

Many credit unions first gain the attention of a potential member by offering auto loans. However, selling an auto loan to someone rarely leads to that person making large deposits or using the credit union for other financial services. With a larger ticket item like a mortgage, however, that’s not the case.

Some of my business partners in the credit union business have told me their members who take out mortgages through them became bigger depositors. And according to a 2018 report by mortgage advisory firm STRATMOR Group, a member who gets a mortgage from their credit union tends to go back to the credit union for future home financing.

Additionally, credit unions are able to provide many more financial products to members who become homeowners. It’s just the natural progression – as people grow up, move into a home and settle down, they start to take their financial interests more seriously. For this reason, a homeowner is more likely to use their credit union for other financial needs, such as personal loans and credit cards.

Credit unions have plenty of well-known advantages over banks and mortgage bankers when it comes to offering home financing. Their tax-exempt status enables them to offer lower rates and fewer fees, and member loyalty generates a lower cost of acquisition.

With all these benefits, however, it isn’t an automatic decision for a member to use their credit union for home financing. In fact, most often they go with the first lender they encounter when they make the decision to buy or refinance their home, even if their credit union can offer a better rate.

Many borrowers, for example, search for homes online and come across a “get preapproved now” link and click on it. Within minutes, they have a loan preapproval in hand. People shopping for homes are also often pushed to use a lender that their real estate agent recommends, even after they have already contacted another lender or their credit union.

New Ways to Turn Things Around

To increase mortgage originations, credit unions need to place themselves in a better position to capture a member’s attention before they start looking for homes or talking to real estate agents. However, credit unions often create obstacles for themselves by not giving sales and marketing the same attention that they give to member service, and this is particularly true when it comes to mortgages.

While credit unions have a captive audience with a strong base of loyal members, most do not have great marketing technology that lets them take advantage of this strength to provide more mortgages. Instead, many just wait until a member raises their hand to ask for a loan.

The solution isn’t sending out monthly newsletters or emails that no one bothers to read. It’s reaching out to members at the right time, with a specific mortgage offer, which a member is likely to respond to because they already know and trust their credit union.

New database-driven automated marketing technologies now make it possible to send out timely offers when members are actively in the market to buy or refinance their home. These tools can significantly increase inbound mortgage inquiries, and they don’t cost much at all.

Most importantly, they are far more effective at identifying exactly who is looking for home financing than almost any other method. Because of member loyalty, a credit union’s database is typically far more valuable than the average loan originator’s database. This makes it incredibly easy for them to sell mortgages to not only their members, but nonmembers as well.

The key difference in newer technologies is their ability to track credit migration, which has taken place at a very rapid rate over the past year. In August 2021, the average FICO score nationwide was eight points higher than a year ago, thanks largely to the recovering economy and consumers using financial stimulus checks to pay down debt.

With soft-pull credit tools, credit unions can monitor their member databases, and track and immediately alert a loan officer to members with improving credit who are likely to be considering a mortgage to buy or refinance their home. The loan officer can then be the first to reach out to the member before a lender or bank does.

Certainly, there is a lot more involved to originating more mortgages than identifying which members need them. But the bottom line is that the benefits credit unions have over other financial institutions don’t mean much unless they take advantage of them. And with the right tools, credit unions don’t have to continue giving away opportunities to someone else.

Louis Zitting is the founder and CEO of the Salt Lake City, Utah-based MonitorBase, a fintech that monitors prescreened credit information and other real-time behavioral data to alert salespeople when someone is in the market to purchase or refinance a home.