WASHINGTON – The end of the refinance boom and the continuing emergence of a purchase market means one sure thing for credit unions: with overall mortgage activity projected to slow down and competition for members’ mortgage dollars expected to increase, credit unions will need to focus on more efficient processes to expedite mortgage funding. Credit unions are continuing to introduce niche products, but it’s becoming more difficult for them to compete effectively just by offering these types of products. According to Callahan & Associates data, credit unions’ dollar volume of first mortgage originations dropped about 36% from 2003 to June 30, 2005. That means credit unions will have to take a close look at their mortgage origination strategies and ability to offer online mortgage applications as a way to differentiate themselves from other lenders. So how can credit unions effectively position their mortgage strategies? Three credit unions that offer online mortgage lending to their members shared their experiences in building competitive and differentiating mortgage strategies with other credit unions on Oct. 18 during a Callahan & Associates hosted Webinar on “Increasing Efficiencies through Online Mortgage Applications.” Joining Callahan Industry Analyst Tom Geggel were Jon Paukovich, director of real estate lending, Ent FCU, Colorado Springs, Colo.; Christine Haroldson, director of mortgage financing, Great Wisconsin CU, Madison; and Mike Long, vp of Lending, University of Wisconsin CU, Madison. According to Callahan, 25% of credit unions that responded to the company’s 2005 Credit Union Technology Survey said an online mortgage application was a spending priority. That number suggests credit unions are in a good position to deal with the estimated growth on online mortgage lending. Projections from Jupiter Research show online mortgages are expected to reach $74 billion by 2009 and account for 5% of all mortgages; and online refinances are expected to rise to $78 billion or 8% of all refinances. But while online applications are an opportunity for credit unions to focus on increased efficiencies and lower their operating costs, Callahan’s Geggel emphasized, “There’s no one way a member applies for a mortgage, and a credit union needs an integrated process so no one independent channel such as branches, Internet, indirect lending or a call center, is more favored and all members regardless of the channel they use receive fast and satisfactory responses.” Ent’s Paukovich echoed Geggel’s comments saying, “We want our members to be able to apply the way they want to and are comfortable with and not force them into a particular way.” The $1.8 billion CU projects it will do $170 million in mortgage originations and 1,200 loans in 2005. Its servicing portfolio exceeds $500 million and 4,500 loans. Paukovich explained that Ent’s mortgage application until April 2004 was a manual one that involved members manually filling out the traditional Fannie Mae 1003 four-page application, loan officers entering application data into Desktop Underwriter and completing a checklist for application documentation. Then, he said, “it would be a fire drill to get out disclosures within three days.” To make that situation even worse, member experience was inconsistent. “Depending on where the member’s application was in the stack could determine their experience. The member would get great service if their application was at the top of the stack and not so good service if it was at the bottom.” Of course, member service was limited to normal CU business hours. As a community chartered CU, Ent competes with other mortgage lenders such as Well Fargo, Countrywide and Chase, “so to compete with these $100 billion companies we needed the technology that would let us do that.” Key to Ent’s successful implementation of online mortgage technology, said Paukovich, was having the support of senior management for investment and ongoing development. “To be worthwhile, mortgage lending must be a core proficiency, the credit union has to have a long term commitment,” he said. About 35-40% of the mortgage loan applications Ent takes come in online, and while members are becoming more technology savvy, “some members still want to meet with a loan officer face-to-face. “The online application is not a silver bullet, it’s just another tool,” Paukovich stressed. Great Wisconsin CU also doesn’t run 100% of its mortgage applications through the online process. While the $334 million CU also needed a process to maximize mortgage loan officers’ time and involve front-line employees, “We do business the way our members want to do business,” said Haroldson. To further differentiate itself from other mortgage lenders and promote its online mortgage services, Great Wisconsin CU branded the link on its Web site to its mortgage information area. Called “HomeZone,” Haroldson said the credit union wants members to know it’s not just an application center but also a mortgage resource center with information they need to know about the home buying process. Of course having an online mortgage application is only as good as the members who use it, and Great Wisconsin CU has steps that address this. Of the applications that are not completed online: * 39% stop at the first screen. They appear to be system testers who never intended to apply. When they have entered contact information, an email is sent inviting them to continue. * 22% stop at the `submit application’ point. All of those borrowers are contacted by a mortgage specialist. The most common reason for stopping is they didn’t know about Great Wisconsin’s M-pass that gives them a unique code to receive a free pre-approval. * the remaining 39% stop at various stages. The CU gives borrowers a week to continue and then either emails or calls them and invites them to continue. Haroldson said Great Wisconsin CU is also in the process of reviewing the reasons that loans “fall out” of the online system. University of Wisconsin CU’s Long said the $805 million CU was also addressing the barriers to members who are not completing the CU’s online application. It’s important to build in touch points with the members, Long stressed, including actively following up with emails or a phone call within four hours and sending automatic emails when the CU receives the appraisal and other standard documents. The CU can also enter the member’s session and finish the application for them. So far, out of 1,850 mortgage applications University of Wisconsin CU has gotten this year, 850 of them have been Web applications. What’s particularly crucial with getting members to use their credit union’s online mortgage lending services is reminding them that the credit union offers mortgage lending. This should be done, Long recommends, through both external and internal marketing strategies. -

ebarr@cutimes.com