Purchase Money Mortgages Touted
A CUSO that helps credit unions increase the number of purchase money mortgages has urged credit unions to consider housing finance less as the marketing of loan products and more as creating a leading sales channel.
“Credit unions should start looking at the home buying decision cycle as a lead channel and design a program that will enable them to capture their members’ business when they are ready to begin their search–not after,” wrote CU Realty Services in a white paper, “Making the Shift: Helping Credit Unions Establish Real Estate Services as a Core Product Offering.” CU Realty Services is a national CUSO headquartered in Scottsdale, Ariz., that helps credit unions tailor their housing finance programs to attract more purchase money borrowers.
“Instead of simply making mortgage loans available, credit unions that include real estate programs among their core services are seen as full-service institutions. They are able to meet members’ home-buying or selling needs from start to finish,” the CUSO argued.
Housing finance experts and groups like the American Credit Union Mortgage Association have long urged credit unions to build their purchase money business against the day when the pace of widespread refinancing of loans slows down.
CU Realty builds its case for improving purchase money lending by pointing out that the way people seek out real estate and finance its purchase has changed significantly–a development brought about by the Internet and technology.
“Traditionally, homebuyers and sellers tended to connect with real estate agents first to find a home, who would then refer them toward preferred banks and mortgage companies–excluding any existing credit union relationships,” the CUSO observed. “Today, due to consumers’ widespread use of the Internet, this is changing. Homebuyers and sellers are going online as a first step to investigate the market and find a home instead of turning to an agent.”
This allows credit unions to become much more pro-active about meeting their members needs for housing finance and essentially launch the process with their members and have them working within the credit union from start to finish, from the point where the member begins to consider that they would like to own a home someday through the search for real estate to the underwriting of a housing finance loan and its closing, the CUSO said.
To bolster its case, the CUSO pointed to surveys that showed that roughly half of home buyers now start their real estate search on the Internet and that 88% have used the Internet at some point during their home search. This has meant that Realtors are generally brought in later in the process, often to confirm or ask questions about a property that the interested home buyer has already found online.
The CUSO also pointed to research that shows credit unions occupy a significantly more trusted position with potential home buyers as a source of housing finance and, potentially, as a source of real estate help generally.
Areas where a credit union can provide this sort of service include education about the real estate purchase and financing process and preparation for a purchase by helping a member save for a down payment. The goal is to get involved with the member’s real estate decision before the member reaches out to a Realtor.
“Credit unions able to capture members’ interest before they connect with an agent have seen their mortgage loan volumes increase substantially,” CU Realty reported. “These credit unions successfully attract members to their websites by providing a comprehensive real estate services program, complete with home and neighborhood search capabilities, agent referral networks, funding applications, online real estate tools and educational seminars on buying or selling a home.”
Dave Von Derau, director of retail mortgage lending for the 220,000 member Wright-Patt Credit Union, headquartered in Fairborn, Ohio, reported that the $2.4 billion credit union had found good success by taking at least some of CU Realty’s suggestions.
“I guess I have been here about two-and-a-half years, and our department has grown significantly,” Von Derau said, adding that the credit union had seen the numbers of housing finance loan officers move from eight in 2011 to 14 in 2012. He also reported that even though mortgage refinancing had been very strong last year, the CU was also looking at increasing its percentage of its housing finance loan volume that went to purchase money loans. In 2011, he estimated that roughly 75% of Wright-Patt’s $300 million housing finance loan volume went to refinance loans and 25% went to purchase loans. But already this year, the CU had seen purchase money loans reach 38% of loan housing finance loan volume, very close to the 40% goal the credit union had set for the year.
“I think we have to focus on building purchase money lending for the simple reason that interest rates can only fall so low and that limits the eventual growth of the refinance business,” he said.
Von Derau explained that CU Realty has a manager on site at the credit union who oversees a team of Realtors who have already agreed with CU Realty’s requirement that they rebate 20% of their fees to the member buying the house. “This rebate offer makes a real difference in a number of cases,” Von Derau added.
This manager and at least one of these Realtors rotate among the credit union’s 24 branches to set up information centers about housing finance and answer questions in each one. This lets the members know they can head to the credit union first for real estate help, Von Derau explained.