How To Squeeze More Out Of Mortgages
CHICAGO-The average credit union closes five mortgage loans per employee per month. But the most productive CUs close more than triple that number: 17-per month.
That is an important ratio to note, stressed Dan Green, EVP-business development at Prime Alliance Solutions in Tukwila, Wash. "Costs to close a mortgage loan are obviously much higher for credit unions that are making five loans a month per employee. And the productive credit unions actually make money during the process of originating mortgage loans."
To improve efficiencies, technology that streamlines the application and processing are important. However, Green added, "Technology by itself will not make you better, faster, or more efficient. It also takes people, process, and strategy. Until you work with the entire equation, you will not find the answer."
Strategy is a key element, and one often overlooked by CUs when it comes to mortgage lending, he said.
Opening Doors Not A Strategy
"The old idea that you open your doors and loans walk in is not a strategy. You have to do things like having loan officers build relationships with real estate agents and homebuilders, and look at your product mix," Green said.
That mix should include ARMs and jumbo loans, Green advised. "There is not a great secondary market for jumbos, but there is a lot of demand for them from homebuyers."
There is also demand for first-time homebuyer loans, and offering the product not only brings in additional mortgages, it lowers the age of their membership, reminded Green.
As CUs focus on closing the loan, little attention is paid to the servicing opportunity-a common mistake, he said. "The credit union should have a strategy for servicing the loan after the sale, especially since many of the low-rate mortgage loans today could go to term. Servicing is a great marketing asset. Through a mortgage loan we know a lot about members, when they may need that next auto loan or college tuition loan. We should use that information to aggressively cross sell them as we service their mortgage."
Taking advantage of servicing opportunities could help offset losses on loan apps that are not closed, he added. "Only 40% of the applications credit unions take actually close. That means 60% do not, and it may cost you about $100 per app. That can add up to a lot of wasted money."