Nine out of 10 CU members look elsewhere for mortgages.
That leaves quite a bit of opportunity for credit unions, according to Tracy Jean Ashfield, president of Madison, Wis.-based consultancy Strategic Mortgage Solutions, and who has some ideas on just what CUs can do.
"Even factoring only members of credit unions, credit unions only have 6% of mortgages. That means 94% of credit union members get their mortgages from elsewhere," Ashfield told attendees of an educational session during CUNA Mutual Group's Discovery conference here.
Part of the problem, she said, is "institutional isomorphism." CUs look at the competition, see them doing something, and then copy it. Instead, Ashfield argued, credit unions should step back and ask: "Is this right for us?"
Who is the competition? The No. 1 lender made 16% of all mortgage loans booked in 2005, she said. The top five had a combined 47%; the top 10, 61%; and the top 25, 74%.
"A lot of big players are grabbing lots of market share," she assessed.
The National Association of Mortgage Brokers, (NAMB) is "an enormous threat" to CUs, Ashfield asserted. While Wells Fargo, Countrywide and Washington Mutual put a lot of money into marketing their mortgage lending capabilities, most mortgage brokers get their business without advertising-through referrals from Realtors. Ashfield said mortgage brokers do a really good job of staying in touch, thereby generating further referrals from their customers.
When CUs were single-sponsor or faith-based, they could get referrals from virtually any member, she continued, because people worked at the same plant or worshipped at the same place.
"Affinity, a common bond or interest, shouldn't we be the pros? The credit union system wrote the book on using affinity, but the rest of the world has taken pages out of that book and run with it."
According to Ashfield, CUs must make several changes to become more competitive in mortgage lending, including: doing a better job of attracting likely first-time homebuyers, age 25 to 34; making the loan process easier for the growing number of people who sell homes without a Realtor; and offering more creative products, such as discounts for "green" (environmentally conscious) buildings.
"Credit unions must think of what's important to the segment they serve," she said.
The process starts with a CU's frontline staff. Ashfield said they must be passionate, have people skills and be willing to adapt to technology and to changes. When a member says he or she would rather go to another lender to get a negative amortization or pick-a-payment loan-which most credit unions do not offer-CUs should turn this into a positive by making it part of their value proposition.
"Explain to members how those things work. Tell the members we want to be with them for life. Prepare a compare/contrast diagram to demonstrate how the credit union's mortgage is better than Wells paying the closing costs, but charging a higher rate."
