Three Mortgage Lending Veterans Share Tactical Advice On Success
Even with more credit unions getting into mortgages, several experts say many have much to learn about the commitment needed-especially related to technology.
"If you think members are going to call you, discuss all the possible products you have, then take time off work to come in and meet with one of your loan officers in your branch, you are mistaken," Kerry Oldenburg told WesCorp's CU Outlook conference here. "You must have a web presence, and it cannot be a generic site with generic numbers. It must be ready to quote a specific rate for a specific scenario for your members."
And that's just the beginning, noted Oldenburg. A credit union must be able to take the application online. "It must be simple, so the member can fill it out in 15 minutes, off the top of his head, with no addresses, bank account numbers or other reasons to get up from his computer. At the end, he must be able to get specific approval based on his credit report. Since we are in Las Vegas, I will tell you these are the stakes it takes to play at the table. That's what your competitors are offering. To compete with retail mortgage lenders, credit unions must match their technology."
Oldenburg, the director of product development for Prime Alliance Solutions, CUSO that provides mortgage services, was one of three speakers during the session. Joining her on stage were Steve Renock, EVP-financial services for Orange County Teachers FCU and president of its CUSO, OCTFCU Mortgage Co. LLC, and Lou Jennings, EVP-operations for Navy FCU.
Renock said the OCTFCU Mortgage CUSO was founded in April 2004 because orange County Teachers wanted to handle mortgages outside the credit union itself. Management realized it needed to hire a number of people for the CUSO from both inside and outside the CU. The CUSO employees are paid differently than the credit union employees, and treated differently.
"We hire if necessary, and we will lay off if necessary, and we didn't want to do that with our regular staff," he said.
In a short time, OCTFCU Mortgage has built an effective business, Renock said. It has a web-enabled, point-of-sale system, a team of commissioned loan consultants, a portfolio of products, and an affinity relationship with Coldwell Banker realty.
In addition, the CUSO eliminated underwriters and replaced them with a loan fulfillment staff, which Renock said has resulted in better, more efficient service for members.
"If the system says 'approve the loan,' we approve the loan and we don't let anyone stick their hand in and mess things up," he explained. "If the system says 'reject,' then we have people look at it. We make sure there was not an input error, or the member didn't put in anything he or she didn't mean. We try not to turn down too many loans."
OCTFCU Mortgage retains the right to service the loans, but it outsources most basic functions. Renock said management decided members' dollars were being wasted trying to do servicing in house, and it was better to contract out.
"We are still there to answer a lot of questions. In our marketplace, we have to be very good. We have to put out a lot of fires."
One problem OCTFCU faces is high local housing costs. In August, the median home price in Orange County, Calif., reached a breathtaking $617,000-out of reach of most of its core membership teachers.
Despite the relationship with a realty company, Renock said bucking the established lending relationships between builders and local real estate agents is a huge challenge. He said no more than three or four people out of 100 who buy a house in Orange County are members of the CU, so it doesn't make sense for most Realtors to have a relationship.
"Many times, members call us to say they are buying a home, the real estate agents wants them to use someone else, but they want to give us a shot. If we get a shot, we've got to do the best we can," he said. "If we do a good job, maybe next time the Realtor has a member of OCTFCU, he or she might not sell them out."
Win, Win, Win
Oldenburg said Prime Alliance Solutions works with 67 credit unions plus 12 CUSOs. Collectively, 1,100 credit unions originate mortgage loans through her company, and its total represents 30% of all CU mortgage originations.
There are several important points to keep in mind when entering mortgage lending, she said. Among the most critical is to have a realtor strategy. "I don't care how you determine your Realtor strategy, I just care that you have a realtor strategy," she declared.
One method Oldenburg recommends is to compile pre-qualified leads from the membership and present those to a real estate agent. "The Realtor will be happy to get pre-qualified leads, and will in turn offer a reduction in commission. This in turn makes the members happy, so it is a win, win, win."
In a sense, mortgage lending is like solving a puzzle, she continued. People, plus the process, plus technology, equals results. The important thing for a CU, she said, is to bring all the pieces of the puzzle together. For part one, people, the lender must understand it is not about the loan.
"People don't want debt. They don't want a mortgage loan. They want a home. It's about the dream of home ownership. So, they need to be addressed and handled in that manner," she advised. "Stop thinking about the loan and start thinking about the member and the process."
When it comes to the process, CUs must know it is not about the lender, Oldenburg said. Instead of "putting members through hell" to get a loan, credit unions should take a good, hard look at their underwriting and documentation policies and make things easier.
For part three, technology, CUs must realize it is not about the system, it is about how the members feel when they are going through the process, she said.
"It's all about the relationship," she said. "You want those members to tell their friends their mortgage experience with the credit union was easy and satisfying."
In the Navy
Jennings said Navy FCU's mortgage operation faces the unusual challenge of being the lender for Navy personnel around the world. He said most loans are handled through its branch network, along with its 21 processing centers. Navy FCU also has a title company, allowing it to close loans itself in 15 states.
"Mortgage lending is very complicated and very detailed. It has lots of moving parts," he said. "But one reason why we have been so successful is, we approach it like a credit union-we really serve our members. We know we have an established relationship with our members and we are going to see them again, unlike a typical mortgage broker. We try to make the process as pleasant as possible."
Unlike OCTFCU Mortgage, Navy FCU retains its servicing. Jennings said this method works better because its membership moves around frequently. For the same reason, the credit union supplies considerable counseling to ensure members have all the information they need and that they can afford the mortgage.
NFCU also has several goals. Among them, he said, is that the credit union presently approves 30% of mortgage applications at the point-of-sale. "We would like to get that number to 80%. When it comes to 24-hour approval, we are at 80%. But, faster approval appeals to members."