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NAPLES, Fla. – Credit unions, like most lenders, benefited from the record-setting low mortgage rates over the past two years, but such good times can’t last forever. Some economists are predicting mortgage rates will start going up in 2003, and credit unions should begin revisiting their mortgage strategies to be able to capture their members’ mortgage business when the tide turns. In fact that’s what attendees of CUNA’s Lending Council Conference who sat in on Dan Green’s presentation on “Mortgage Loan Growth Strategies: Helping Members Capture Their Dream” did. Green, the executive vice president for Prime Alliance Solutions had a mixture of good and not-so-good news for conferees in his session: while the entire U.S. mortgage lending portfolio is expected to drop $1.7 trillion in 2003, interest rates will be about the same, and the refinance boom will probably continue through the first half of next year. After that it will taper off and become a purchase market. With credit unions braced to face an over capacity-filled market and memberships quickly maturing into aging baby boomers, “credit unions are going to have to start using innovative and creative ways to attract mortgage business. Even if credit unions do a great job attracting younger members, there will be fewer buyers,” said Green. The former executive vice president of CUNA Mutual Mortgage Corp. and senior vp, League Services for the Missouri Credit Union System estimated only 5% of members will purchase a home in 2003. How will credit unions find these potential homebuying members, and more important, how will they capture them during a time when the market and price competition heats up? “Traditional methods credit unions have used like statement stuffers and direct mail to all their members won’t work,” said Green. “You’re going to have to find where these members are and market to them just the way they want to be marketed to.” Green said CUs have to change their mindset and the way they think about promoting their mortgage services. He offered four suggestions: *focus on purchase first and refinancing second. Credit unions need to concentrate on purchase money and set up their mortgage operation so they’re there when the member is ready to close the loan. *the long-term is the immediate gratification. CUs should look at mortgages as a long-term payback. It’s not just about cash today, said Green, you have to think of mortgages as a long-term payback and long-term investment and cross-sell these members everything you can. *CUs’ mortgage operations should be member-centered and home focused. CUs need to work to eliminate every possible barrier standing between the member and the home they want to buy. “Remember, the member doesn’t want a mortgage, they want a home. They simply need one to buy a home. Credit unions’ job is to help the member buy their home and the various purchases around their home. That’s what’s important,” said Green. *CUs need to think of mortgages in members’ terms, not the credit union process. Members, said Green, are going to go where they can get their loan on their terms. Credit unions need to be available to members in all the ways they interact – face-to-face, call center, Internet – and have consistent processes in all the channels. Green discussed with conferees some internal and external tactics they should consider using to help bring in first mortgage business. Among his suggestions and ideas he took from the audience were homebuyers’ seminars – “If you target first time homebuyers, those are the ones that will show up”; home seller seminars – “People who sell a home usually buy a home”; home owner seminars on products such as insurance and estate planning. Green also recommended CUs build relationships with realtors and builders since they influence the buying decision. Granted, he said, most realtors don’t consider credit unions as being home lenders or if they do, then at least not good ones. One possible solution to ameliorate that situation is to offer realtors the opportunity to set up in an area in the CU’s lobby. That will give them a chance to interact with members, as well as build member awareness that the credit union offers mortgages. Among the internal tactics Green recommended were: following up and re-contacting members who’ve been preapproved for a mortgage, and provide incentives for the CU’s mortgage staff to cross-sell mortgage-related services. Green also strongly advised credit unions to move away from the traditional sequential mortgage process of originating, processing, underwriting, closing and servicing the mortgage. “It’s painfully slow,” he said. “Credit unions need to reengineer their mortgage process and do most of the originating, processing, and underwriting functions concurrently at the point of sale. Once the member is approved, then you close and do the servicing,” he said. “To successfully reengineer your mortgage process you have to engage a lot of people to make it work and get commitments from senior management, your operations team and mortgage staff,” said Green. “Reengineering isn’t about technology. That’s just what makes it happen, it’s a tool. “With rates as low as they’ve been, members have become serial refinancers,” said Green. “That will change as rates go up, and credit unions have to plan for when that time comes.” -

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