Boy, how times are changing in the mortgage business. While credit unions have benefited with increased market share of loan originations tied to the economic crisis of a decade ago, new players have entered the market.
These “disruptors” use digital processes to promise a better experience. They know very well that although everyone wants to own a home, no one want to go through the mortgage process.
Buying a home is complicated for the borrower: gathering dozens of documents, deciding on a loan type, choosing a lender, selecting a Realtor, etc. So many decisions; so much time; so many headaches.
It’s no surprise disruptors have seen an opportunity. Their model is appealing. Mostly, they promise speed and simplification. We’ve all seen their marketing efforts—they make it sound like you can get a loan in minutes.
We all know that’s a huge oversimplification. There are TILA rules and loan program requirements. Borrowers might qualify for one program but not another. But borrowers themselves—faced with making the biggest financial decision of their lives—might not know that it’s not as easy as disruptors make it seem. This is especially true for first-time homebuyers.
COMPETING MEANS DIFFERNTIATING
So, how do credit unions compete with these newcomers (and the rest of the mortgage lenders)?
My answer is to differentiate yourselves. Show your members (and potential members) that you can do a better job than any of the digital disruptors.
Let me share this recent story about one of those disruptors.
Credit Union member “Joe” was very rate-conscious. As part of his search for a lender, Joe saw the TV pitch for one of the disruptors and began filling out their mortgage application online. Before he hit “send,” Joe received a call from a disruptor call-center rep, telling him, in essence, “Do we have a deal for you.” Joe said, “I felt like it was a car salesman’s pitch.” And that’s not all. Joe kept receiving calls from the disruptor, day after day, at all times of the day and night, urging him to take out a loan. He finally had to block the calls.
The disruptor wasn’t interested in consulting with the prospective borrower. There was no plan to build a relationship, either. There was just a desire to sell a mortgage loan.
WHAT’S YOUR PLAN?
So, when I talk about differentiating your mortgage loan business, I mean you need to have a plan.
First, look at your own program. What can you do better? How can you simplify the process? How can you speed up loan approval?
Your pipeline must run smoothly from origination to closing. Make sure your loan officers and underwriters communicate with each other; make sure whoever “owns” the loan regularly contacts the borrower with updates—at identified “milestones” throughout the process—and sometimes just to tell them the process is moving forward and ask if they have questions.
As you look for differentiators, remember Joe’s experience.
- In contrast to the disruptor experience, you need to offer consultation. For example, what loan best fits the member? If you don’t offer a variety of programs, check out the FHLB, FHA, VA and USDA loan programs. One recent survey found that more than a quarter (28%) of respondents wished they had received more information from their financial institution about mortgage loan options before they got their first mortgage.
- Build a relationship with the borrower. This requires some “hand holding,” and telling them at the outset what to expect as their loan moves forward. Lay out in detail (a guidebook, checklist, and website materials are all good bets) what you expect from them, and show them how it will help you more effectively do your job. Reply promptly to questions.
- The member comes first. Make sure they know you will act in their best interests. Be ready to explain the entire experience—or any piece of it. For example, hold workshops and seminars. Publicize your loan products—online, in newsletters, in print and broadcast ads. Set a standard for loan approval; offer in-person, telephone and online originations.
- Work with Realtors. Invite them to see how you operate and what you offer. You can establish working relationships with Realtors by letting them know what loan products you offer; then the Realtors can help your members in a variety of homebuying situations.
While it may be true that nobody really enjoys the mortgage process itself, the prize is still golden—home ownership. If you can make the process as comfortable as possible for your borrowers, you will continue to win business and compete with anyone, including disruptors.
Bob Dorsa is the president of ACUMA, the American Credit Union Mortgage Association. You can reach him at firstname.lastname@example.org or (877) 442-2862. To learn more about the organization, including its workshops in June that delve in to many of these topics, go online to acuma.org.