Credit union members may love their CUs, but when it comes time to obtain a mortgage, they usually look elsewhere.
According to one expert, the reason is a combination of the low and high expectations people have of credit unions that must be addressed through better marketing efforts.
Edith Bullard, a principal in the marketing department of the e-business division at Fannie Mae, led an educational session at the CUNA Lending Council conference here. Bullard noted that only 2% to 3% of CU members have their mortgage loans with their credit unions. In an effort to understand why that figure is so low, Fannie Mae performed focus group research with people who consider their CU to be their primary financial institution.
"Our research found commercial banks provide a frame of reference for credit unions," said Bullard. "Members like the convenience and availability of the large banks, but they like the service at credit unions."
A Love Disconnection
"Members love their credit union," she continued. "They like the low teller turnover that means they and the tellers know each other by first names. They like being members with people just like them-all teachers or all in the military. They especially like having the ability to vote for the credit union's board of directors. It makes them feel empowered; like they affect the direction of the institution."
Fannie Mae's research also found nearly all members were aware their credit unions offered mortgage loans, and there was a desire among members to do business with their CU. So if members love and trust their CUs and want to work with them, then why are the loan numbers so low?
Bullard said members held several "interesting" assumptions about the mortgage lending process. They expected their credit union would be easy to work with, the interest rate and fees would be low, their loan would be done in one day, and the credit union would not sell the loan. When reality failed to live up to this rosy picture, they became upset.
"People found the process difficult, cumbersome and impersonal; this surprised members," she said. "They didn't like the long delays. If there was a referral to a third party, such as a CUSO, that shocked members who were expecting a 'local' feeling. In some cases, the credit union's interest rates were higher than local banks."
On the other hand, some members of the focus groups Fannie Mae talked to did not seek mortgage loans from their credit unions because they had low expectations. They assumed their CUs were not "sophisticated" enough to have the necessary expertise to handle mortgages.
"Ironically, many members originated their mortgage loans with the large banks they actively disdained," said Bullard. "They rationalized this by saying, 'I don't have a relationship with the big bank, my relationship is with Jim, my broker. I trust him.' "
To combat both the low and high expectations that are hobbling their mortgage business, CUs must take several steps, Bullard advised. First, they must have a knowledgeable staff that can field all questions a member might have. Second, they must provide education to members. Third, they need to give advice that helps members choose the optimal mortgage packet. Fourth, offer competitive interest rates. Fifth, reduce the waiting time.
"The most critical thing credit unions must do is to offer a high level of personal service," she said.
What Members Said
Fannie Mae asked CU members if they wanted their credit unions to have a mortgage section on their website. Bullard said at first glance, some thought the idea of having information and an application online sounded easy and convenient. They especially liked the ability to check the status of their loan at any time.
Many expressed concerns with handling the mortgage process online, however. Some said it was "inappropriate" to apply for a mortgage over the Internet; that the online method was more suitable for a smaller loan.
"There was a strong desire to talk with a person when it comes to the complicated topic of a mortgage," said Bullard. "People felt there was more accountability that way."
"Automation in and of itself is not the answer," she continued. "People liked some of the features of the automated process, but felt it does not replace the personal touch."
Because many younger people are being raised with a high awareness of technology, the next generation of CU members will be more apt to do things online, Bullard said. However, they will demand a "perfect" online experience, and won't tolerate sites that are difficult to navigate or have technical glitches.
