Once buyers make up their minds about which institution they’re using for a mortgage, they tend to stick with that decision. Almost half of the respondents to the Consumer Financial Protection Bureaus’ 2015 National Survey of Mortgage Borrowers reported serious consideration of only one lender during their hunt, and 77% filed their sole application in a similarly loyal fashion.
However, according to the same survey, the 11 factors ranked as very important by survey respondents include things such as reputation of the lender (#2); recommendations from real estate agents or home builders (#3); recommendation frompeers, friends, or family (#4); and past mortgage experience with the company (#6).
All of these decisions hinge directly or indirectly upon previous experiences, so ignoring the borrower experience today sabotages tomorrow’s business. With that in mind, here are ways credit unions are enhancing each phase of the mortgageprocess.
First Steps
Overall mortgage origination activity fell in 2014. Fortunately, the decline for credit unions wasn’t as steep as that reported by the American Bankers Association 22% at year-end versus 39%, respectively. What’s more, market sharefor cooperative lenders grew to 8.4%.
They can also select their loan officer from the website which includes images, bios, and the locations officers serve and start an electronic application.
According to the CFPB survey, approximately 30% of home shoppers decide on a mortgage product first and then pick a lender that provides it versus dialing down into a chosen company’s products. Lenders with a wider range of offerings includingthose that offer custom mortgages, such as Consumers Credit Union ($585M, Oshtemo, MI) have a leg up with these types of shoppers.
According to Consumers’ website, the credit union currently offers:
- A HARP-style refinancing option called the High Five Refi for members who are underwater on their home.
- Lot and construction loans.
- A hometown mortgage USDA product.
- An alternative mortgage that offer the benefits of a FHA-style loan without many of the costs and qualification requirements.
But Consumers doesn’t just provide home shoppers choice in the product line. They can also select their loan officer from the website which includes images, bios, and the locations officers serve and start an electronic application.As of fourth quarter 2014, Consumers’ penetration rate for real estate loans was 6.7% versus a peer average of 4.5%, according to Callahan & Associates.
Post-Approval
Members with first mortgages at their credit union tend to have the strongest, deepest relationships and are the most profitable, said Brad Barnes, chief financial officer of Air Academy Federal Credit Union($481M, Colorado Springs, CO), at Member Loyalty Group’s 2015 Loyalty Live event in Phoenix last month.Yet according to Net Promoter Score data, mortgages typically have a higher percentage of detractors and passives those who activelyspeak out against your brand and those on the fence who are at risk of being snatched away by competitors, respectively than any other areas of the business, he says.
It’s the industry’s best product, but we do a terrible job of delivering it, he said. Loan reps are often too busy to call the members and communicate with them throughout the process.
Even something as simple as the guarantee that a loan will close within a set time frame can help mitigate borrower frustration during this process. The threshold at Kinecta Federal Credit Union ($3.6B, Manhattan Beach, CA) is 21 days, barring any borrower-driven delays. That’s roughly half the 40-plus day average closing period of all community lenders, according to Equifax. And if Kinecta misses the deadline, it will even cover a certain amount of the buyer’s closing costs.
It’s the industry’s best product, but we do a terrible job of delivering it.
The Filene i3 group, in which Barnes was a participant, has created an automated web-based interface that walks members through each piece of the loan application and approval process.
The i3 team based the idea for HomEase on its experience ordering pizza. The pizza company’s website provided an estimate of when the food was going to arrive, which promptedthe group to question whether it could offer members the ability to check the status of their mortgage.
During the program’s initial 14-week pilot, roughly half of the 250 participating borrowers logged in to the HomEase interface an average of five times, even though the only marketing came word-of-mouth from credit union staff.
Calls to mortgage officers typically simple questions or check-ins decreased 30% during the trial. That’s a potential cost saving of approximately $81,325, Barnes says.
Phase two of the program involved creating additional improvements such as a new interface, more educational tools, and the ability to upload home photos. With those completed, HomEase has since rolled out for an additional trial phase with 28 creditunions participating.
Signing, Funding, And Happily Ever After
When CFPB-driven disclosure changes take effect this August, credit unions will be required to issue documents to consumers three days in advance of closing. As such, more effective methods to share, sign, and fund during the final legs of the mortgageprocess are back under the microscope for many lenders.
In 2014, two credit unions were among those chosen to take part in the CFPB’s eClosing pilot program, and according to Mountain America Credit Union($4.2B, West Jordan, UT), early experiments with the process reduced the time needed to sign closing documents by fourfold.
In a regular closing you would have a day or two in between for funding because the document package would have to be sent to the lender, said Amy Moser, Mountain America’s vice president of mortgage services, to nationalmortgagenews.com.
By comparison, the CFPB process opens the door to same-day funding as well as the potential for same-day occupation for the borrower, she said.
At the same time, credit unions are also tapping into the post-closing experience. As part of its first-time homebuyer’s program, Solidarity Community Federal Credit Union ($209.5M, Kokomo, IN) provides a welcoming kitwith U-Haul discounts, pizza coupons, and a tool set to minimize stress during this major transition.
Such small tokens demonstrate the credit union is interested in helping members celebrate their accomplishment rather than just shifting focus to the next loan.