Two of your credit union members just applied for home financing-at the bank down the street. They've been members for five years, feel perfectly at home with the convenience of your online checking account transactions, recently signed up for a safe deposit box, and stopped in last week to discuss a new car loan. But when they found their ideal home and needed financing, where did this young couple turn?
Why did your credit union miss out on this opportunity to help these active members with possibly one of the largest financial transactions they'll ever make? Could it be that your mortgage program doesn't offer the product selection or flexibility they need? Do they think a credit union isn't large enough to provide the speed and services of a national lender? Do they know that mortgages are available from their credit union?
I've seen this scenario repeated across the country, and I'd like to share some thoughts on how to run a more effective mortgage program, one that will save you money and keep your members closer to their credit union "home," even for home financing.
I've been in the financial services industry 18 years, and I know credit unions typically don't think they have the time or resources to offer a full-scale mortgage department. Even if home loans are offered, the program may not be extensive or highly promoted. If you already offer mortgages, you probably know that a mortgage program enhances your organization's image as a full-service financial resource and can protect you from losing members to another mortgage origination source. If you don't offer them, now is a good time to start. However, to reap the benefits, your mortgage program needs to offer the loan product selection and flexibility members expect-and to do that cost-effectively, the program needs to be run efficiently.
What can you do to ensure that your mortgage program is as efficient, cost-effective, and member-friendly as it should be? I think the key is to make a commitment to develop and maintain a program that's as competitive and comprehensive as possible-and the more efficient the mortgage program is, the better your credit union's bottom line will be. To establish a solid program, you'll need at least one staff member who understands the mortgage process enough to ensure you offer the products and services members need. If no one has that expertise or you don't want the expense of maintaining a full-time mortgage department staff, outsourcing some of the program components can offer an effective alternative.
Tips For A More Efficient Mortgage Program
In either case, a well-managed mortgage program will allow your credit union to:
1. Offer the best product mix for members. It's important to provide a variety of products and services. You don't want to get locked into relying on one market segment to drive all your mortgage business. Your membership base potentially includes many different loan categories: first-time homebuyers, trade-up homeowners, downsizing retirees and members looking for home equity loans-and yes even homeowners ready to refinance, because every time the rates drop a little, more people fall into the refi zone. It's also more efficient and profitable to serve members' mortgage needs throughout the year rather than marketing your program only during the peak summer homebuying season.
2. Handle compliance issues. In an increasingly burdensome and ever-changing regulatory environment, compliance controls and vendor relationships are becoming more critical to ensure that appropriate requirements are being met throughout the origination and delivery process. Compliance is not an option. You need to ensure adherence to federal, state, and local regulations, and to do that you need a compliance expert who knows the current regulations and understands how to meet them. Credit unions with a localized market area often find it easy to keep an expert on staff to handle these issues, but as your market broadens into regional or national areas, it is more challenging to know every rule change and its impact. When it becomes more complicated than credit union personnel can handle, it may be wise to consider outsourcing with a company that is ready to shoulder that burden.
3. Have the right technology in place. Technology should make it easy for members and staff to use the system and for staff to work with other mortgage professionals and vendors. It should make the process simpler, not more complicated. Focus on technology that:
* Can be easily distributed throughout your organization.
* Is simple to learn-a short learning curve is one of the keys.
* Helps meet current and evolving regulatory requirements.
4. Provides an easy-to-use tool allowing members to shop for loan information on your website. Mortgage shoppers may not want to give up face-to-face service when signing papers, but they like the convenience of shopping and gathering information online-and if they don't find information on your site, they'll probably be looking at your competitors.
Provide the level of servicing you choose. From a servicing perspective, the question of outsourcing becomes an integral factor. If your credit union is committed to retaining the servicing rights to your loan production, one of your major decisions will involve whether to service loans in-house or outsource this function (subservicing). The actual cost of servicing is often undervalued, so any credit union that intends to retain servicing rights should have a clear understanding of the real costs involved in relation to the level of servicing to be provided. This would include answering questions such as: What is your credit union's comprehensive cost to service? How does the internal cost compare to the cost of outsourcing? Do you have the in-house infrastructure and expertise to service the loan in compliance with all federal and state servicing laws? A knowledgeable lender can help answer the key questions. In many cases, outsourcing may offer a solution that maximizes the servicing value at a more controlled cost. Whether servicing is in-house or outsourced, look for:
Online member access to loan information.
* A web environment that looks to your members as if your credit union is involved.
* Electronic means to move loans (flow or bulk).
* Remittance and reporting functionality that fits your needs.
When Is It Right To Outsource?
If your staff doesn't have the knowledge or time, or you simply don't want to run a full-time mortgage department, outsourcing offers a solution that provides the flexibility and product variety to compete with larger lenders without the expense of maintaining a full-scale mortgage department. You'll want to take a close look at any third-party vendors to be sure they offer the products, services, and technology to keep your mortgage program running smoothly. Key factors to check include quality, flexibility, and experience levels that match your needs. For example, for compliance look at lenders with the technology to deal with the ever-changing regulatory environment. For servicing and subservicing, look for vendors offering the functions you need with no cross-selling to your members. Outsourcing can turn the fixed cost of maintaining a full department into a variable that allows you to better handle the volatility of the market without the need for staffing adjustments or retooling an entire department.
For credit unions, a comprehensive mortgage program provides a substantial added value for members, as well as giving members more reasons to come into your office or check out your website. Maintaining an efficient, well-managed mortgage program will help ensure that you offer members the best selection of mortgage products, terms, and services, while also staying in compliance and keeping costs in control. Plus, an efficient mortgage program helps ensure that more of your members feel right at home coming to the credit union for all their financial needs.
Dan Rotert is CEO of Greystone Residential Funding, Inc. Middleton, Wis. He can reached at 888-766-4734.
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