Thomas Edison once said that most people miss a good opportunity because "it is dressed in overalls and looks like work." Sage advice from a great man. But many times, seizing a good opportunity isn't that hard at all.
When it comes to taking advantage of the current market to grow a mortgage business, I believe credit unions are on the verge of a truly golden opportunity-one that requires no overalls and in fact actually requires less work.
First, credit unions have a huge advantage over the nation's largest banking institutions when it comes to the trust of the American consumer. Every week, it seems another major bank is involved in a lawsuit involving some matter or another, whether it's unfulfilled loan modifications, excess fees or accusations of fraud.
Second, any competition credit unions might have faced in the past from independent mortgage brokers has shrunk significantly. According to various statistics, the number of mortgage brokers has fallen between 60% and 80%. Their numbers are likely to diminish even more in light of recent financial reforms that take aim at yield spread premiums, a primary incentive for brokers.
Third, and most importantly, more consumers than ever are taking their searches for home loans online. Survey after survey indicates that a growing number of home buying customers are looking for loan products and rates on the Web. In spite of this, relatively few mortgage operations offer a Web solution to meet the need. According to a recent survey of 330 U.S. financial institutions by market-research firm Lieberman Research Group, only 18% of banks and credit unions are providing borrowers with a complete online mortgage solution.
All together, these factors point to an enormous opportunity for credit unions that are able to leverage prospects into an online, consumer-facing point-of-sale mortgage platform. Indeed, I regularly talk to credit unions that have seen this opportunity for themselves and are gleefully taking advantage of it. Yet the vast majority of credit unions don't realize this opportunity is out there.
Why is this? The common view is that it looks like work and that technology is expensive. In a difficult economy, who has hundreds of thousands of dollars lying around to build an online mortgage platform? But if one investigates the reality behind these statements, they'll discover the truth-that the cost to set up a complete Web-based mortgage platform is a mere sliver of what it used to cost to develop one from the ground up. In fact, you can acquire a complete online mortgage shop for virtually no startup costs and very little monthly expense as the lengthy contracts required by today's technology vendors have shortened dramatically. The technology behind these solutions is frequently better than what the large banks are using. And it can be employed and up and running not in a matter of months or weeks but just days.
In addition, the solutions that are on the market today are exponentially better than the solutions of five years ago or even a year ago.
Institutions that have taken advantage of this opportunity gain superior, real-time pricing control, along with the ability to take a single borrower's criteria and evaluate it across numerous loan products. Not only that, but the speed at which today's pricing and product engines operate-we're talking automated, real-time data-is reducing origination times into a fraction of what they used to be.
Another important feature of the online mortgage platform-besides offering the kind of service your members expect and appreciate-is the degree of automation and efficiency it brings to a credit union's operation. Automated rate and status alerts can eliminate the need for constant pipeline monitoring, which lets loan officers concentrate on more important tasks. And automated rate sheet generation allows loan officers and credit union members to immediately compare products and rates across a large number of lending institutions.
In addition, online mortgage platforms can provide protection and ease of compliance. Today's solutions aren't just useful for shopping and ordering loans. You can also use them to calculate required APRs and underlying fees, create RESPA-compliant good faith estimates and virtually eliminate the risk of investor buybacks by ensuring conformity with the underwriting guidelines.
There's also a common sense reason why credit unions of all sizes can and should embrace online mortgage solutions. Internet banking is already the standard, no matter what size your institution. Consumers will assume their bank or credit union will support online bill payments and be able to handle account transfers and other requests. So if your members are already banking online, why wouldn't you give them the power-via a simple mouse click-to check out current mortgage rates and start shopping for a home loan as well? Keep in mind, if you're not offering your members a means to search and compare rates online, they are only another mouse click away from a bank that can.
I realize that the picture I've drawn looks a bit too good to be true. I might doubt it too, if I hadn't personally met the presidents of many credit unions who have already realized the benefits I've just described. And not a single one of them was dressed in overalls.
Bruce Backer is president of LoanSifter
920-268-4770 or firstname.lastname@example.org