Nationally, credit unions have become a much more active participant in the first mortgage business and increased their market share of closed first-mortgage loans from the traditionally insignificant 2% to an attention grabbing 8% in the second half of last year. Interest rates have remained at historic lows the past several years and because of this, credit union first-mortgage loan volume grew dramatically. However, this increase can be directly tied to refinances.
We have heard and read the predictions that refinances will decrease. But credit unions have not experienced a dramatic reduction in refinance business and have seen a recent uptick in purchase applications. As anyone in mortgage lending for more than 10 years knows, the evolution in first-mortgage business from almost completely refinances to purchase money is inevitable.
With that said, are credit unions positioned to maintain 8% or even increase their market share of closed first- mortgages? With refinance volume still considerably greater than purchase volume, refinances remain the predominant mortgage loan for credit unions. Because of this, efforts to address the inevitable market move to purchase money mortgages might have been put on the back burner.
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Are you really aware of what has to be done to capture this type of mortgage business? A handful of credit unions and CUSOs have been working to establish the relationships needed to generate purchase money applications and because of that, they are ahead of the curve. But the majority of credit unions and CUSOs have relied almost exclusively on member refinance business. To successfully compete for purchase money business, it is going to take more than sending an email to members or including an insert in a mailing or hanging signs in branches. It will take an adequately funded comprehensive plan. The plan must be a strategic priority with a focus on building relationships with Realtors, attorneys, accountants, members and most importantly your credit union and CUSO staff. One important aspect to remember is that aggressively prospecting for member purchase money mortgage business is probably a new concept for your credit union or CUSO and if your plan does not include franchising your employees, it will not be as successful as it could or should be.
If you are not one of the few credit unions or CUSOs that have the individuals on staff with the experience to develop a successful plan to capture your member's purchase money mortgage business, seek help or guidance to ensure you develop a team that really understands who constitutes the market you are going after, what channels to use to rollout the plan, when to market to the targeted segments, where your market is and how you intend to fully implement the plan. In order not to waste time, resources and marketing dollars, the entire plan must be clearly written and it is extremely important your plan is a living document. You should be prepared to immediately make modifications to your plan if you really believe they will improve your results.
You must have a clear vision of to whom you intend to market. Remember, it will no longer be just to your members. The typical marketing approaches used in the refinance boom will not, by themselves, be sufficient to generate or sustain purchase money business. Another factor typically not considered when marketing solely to members is that in order to realize the best return on marketing dollars, the timing of your contacts must be strategically scheduled. Because you must now consider more than just your members, it is incumbent upon you to carefully identify the geography of your marketplace. A too small or worse, too large of a marketplace will lead to failure.
If you do not have a well thought out, multi-faceted plan designed for protracted implementation that capitalizes on your strategic advantages, your credit union or CUSO will not be successful in closing your fair share of member purchase money mortgage business.
Cos Manzo is president of Cos Manzo Consultants LLC.
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