How One CU Has Gotten Innovative To Compete In Mortgage Lending
In a market in which it competes not just with typical home lenders but other, larger credit unions, CUNA Credit Union has had to get innovative as it has worked to build mortgage market share.
It was first in its Madison, Wis., market to offer a 40-year mortgage, offer an interest-first (or interest-only) product, and a unique construction loan with an early-lock feature as part of its menu. Moreover, it has found unique ways to expand mortgage staff without expanding the credit union's overall staff.
Christine Haroldson, director of mortgage financing at the $325-million CUNA Credit Union, shared some of its strategies with CUNA Mutual's Discovery Conference here.
With interest-first mortgages, Haroldson said it's important that members are made to understand how the loan works, as it's different from other mortgage paydowns. In CUNA CU's case, it introduced the product to assist CUNA Mutual employees who are often transferred.
Another product that Haroldson said has "been huge for us," has been construction loans that allow the borrower to lock in early."
"People are afraid to build. It's nine months to build a home," said Haroldson. CCU provides a 10-month lock and a ceiling on a five-year ARM product that has a two-time close. "We do the two-time close because we allow some people to build on their own, and so many people were changing things," she explained. "The other thing we've implemented in the last 60 days that has been very helpful is we were making people take a second mortgage on their existing house to pay for construction on their lot loan, and then they had to finance the construction loan. That meant they had three (mortgage) payments."
CUNA CU has since consolidated that lending options for members. CUNA CU sells most of its loans to Fannie Mae but retains the servicing.
"It's all about being innovative in your products," she said.
To expand its approvals, CUNA CU has initiated the Fannie Mae programs that give members more options to get approved. Even if members don't choose those options, they do choose the credit union, noted Haroldson.
Haroldson also recommended the Down Payment Assistance Programs that are available through numerous agencies and groups. "Don't overlook the power of government agencies to help you get business from first-time homebuyers," said Haroldson. "It's not always about the technology. Many first-time homebuyers don't use the Internet."
CUNA Credit Union has rolled out an online lending program it has branded as "Home Zone," which is based upon Mortgagebot's technology. Not wanting to send members to the Mortgagebot site, where loans are also available, it chose to brand its own product.
"I don't think it changed our process as much as we thought it would," said Haroldson. "How it changes your process is really up to you. Some credit unions put every application through the online channel. We don't. In our case, our budget isn't as big. Also, our members ask for a personalized touch. You have to do business in the way your members want you to do business. As for volume and the length of time to close, we've not noticed a huge change. The experienced, refi borrower is great with an online system."
CUNA CU has three originators to service its members via its eight branches (and 10 staff total). To compensate, it trained 40 MSRs to take an application on the Home Zone site. "Our Home Zone is to us a resource center," said Haroldson. "We don't say it's an application center."
Haroldson said CCU has taken its training to another level this year. The first level was for new MSRs; the second was for people familiar with the system who weren't originating many loans (who were given role-playing training) and the third was greater product knowledge training.
She said the credit union has also created a letter that can be provided quickly to borrowers eager to buy a home and show they are approved for a loan and which can be shown to real estate agents. While the loan is subject to further qualification of employment, etc., the loan has been run through the approval process.
CUNA CU offers online what it calls "M-Pass," which allows a free preapproval. The goal was to keep mortgage shoppers from just shopping the site with no intention of actually applying. To achieve that, CUNA CU gives a code to Realtors and its own originators that can be given to prospects that they can use to get a free preapproval. Otherwise, CUNA CU charges $75 for preapprovals.
Haroldson said CUNA CU has established standards to ensure that all applicants, including online, that they will be personally contacted within a certain period of time.
CUNA CU has also introduced "Investment Property Loans," some of which are referred to its commercial lending department. CCU offers three- and five-year ARMs with no points and closing costs of less than $1,000. In part the program stems from the fact Madison is a college town that is home to many one- to four-unit buildings that are rented to students.
"We listened to our borrowers, found what the market needed, and saw what our competitors weren't doing," she said. "Let me warn you, you do have to have experienced lenders."
Haroldson recommended credit unions visit the Twin County Credit Union site to see how it set up its Mortgage Center, which is also powered by Mortgagebot. She also pointed folks toward the InvestorsBank site, which she called "clean and crisp."
To increase its mortgage service, CCU has instituted quality of service survey scores (done through CUNA Mutual's HR Value Group), constant employee reinforcement, and a member suggestion form at loan closing. In addition, Haroldson personally calls every loan that is closed to say "thank you" and to ask if there are any other questions. "Sometimes it hurts to listen to criticism," she noted.