Plenty has been written about the unique way credit unions approach their members, especially when contrasted with the way other financial institutions serve their clients or borrowers. Credit union executives famously think differently about serving the needs of their members. The member experience is top of mind with nearly every decision.
This approach has yielded significant success in specific areas of their business, most notably in the auto-lending space. This sector aligns with their commitment to personalized service and building strong, loyal relationships.
“Some credit unions have largely faced an uphill battle to win their members’ mortgage business … That may be about to change.”
Whereas initially, many members might have come into their credit union to get a loan for a new car, today the credit union is in the finance department of virtually every auto dealership in the country. In effect, the dealership’s finance manager has become the front-line salesperson for the credit union, allowing it to meet their borrower’s needs at the point of sale at the same time they attract new members.
Some credit unions have largely faced an uphill battle to win their members’ mortgage business, which has put them behind larger independent mortgage banks and correspondent lenders. The real estate business is more complex, and compliance rules have created a very different marketplace. This could be one reason why credit unions have only controlled around 10% of the annual mortgage market. That may be about to change.
Simmering anticipation
During a real estate downturn mortgage lenders tend to cut back. It makes sense, given the lower loan volume and the historically high cost-to-close. Periods of downsizing often result in less travel to industry events.
Last year’s American Credit Union Mortgage Association (ACUMA) conference enjoyed near record attendance. Even after almost three years of downturn in the mortgage market, small institutions that haven’t had a major role to play in home finance in the past were represented in good numbers for the ACUMA mortgage-focused conference.
The September interest rate drop created some buzz, but that wasn’t why executives turned out for this show. In addition to the much-anticipated networking, they clearly see the importance of the mortgage as a financial tool for their members and didn’t factor in the reduction in loan origination they had experienced over the past couple of years.
On the one hand, that’s a luxury enjoyed by companies that have always operated with low volumes, one that mono-line lenders that saw their volume drop by half or more do not. On the other hand, it’s a very visible sign of commitment to the product. In good times or bad, when it comes to financing your home, credit unions are always there.
Maybe this is why credit union executives often seem surprised when their members don’t realize they offer mortgage products and finance their new home purchases through another lender. For the typical homebuyer, the journey to homeownership doesn’t have a pit stop at the credit union, but perhaps it should.
Anecdotally, numerous executives during the fall business events reported that members were coming to them with concerns about homeownership. Their inability to find affordable financing was driving them to consider new alternatives, such as their credit union. This is likely to happen more in the days ahead and credit unions, as always, will continue to support their communities.
Existing connections
Marketing is an important part of any business and if credit union members don’t know their credit union offers home finance, they won’t consider their institution an option. There are many ways to get this message across to credit union members.
“Expect more of these institutions to embrace mortgage marketing and, as a result, taking a larger share of the mortgage business when it returns this year.”
There were 4,645 federally insured credit unions in America, collectively servicing 138.8 million members, as of Sept. 30, 2023, according to the National Credit Union Administration. That’s a lot of prospective home loan borrowers to have in your database when mortgage interest rates start to fall.
Expect more of these institutions to embrace mortgage marketing and, as a result, taking a larger share of the mortgage business when it returns this year. Making it clear to credit union members that mortgages are available could be the easiest way to drastically increase their business next year.
It won’t be difficult to do. Some content about home affordability in their market areas could make these institutions part of the homebuying process before some consumers even begin looking for a new home. When their members do come back to the real estate market, the fact that credit unions often hold mortgages for their members in their portfolio, could allow them to provide more affordable options for their members.
Once their members do begin to see them as a strong option for financing their next home, it comes down to performance. That’s where technology comes in. One milestone lending executives say they must achieve to win more business is achieving a fully digital experience and that definition can vary.
Moving a class of financial institutions that were built on personal relationships with their members into the fully digital realm can feel like a shocking cultural shift. With the right software, it’s not about handing the relationship off to a robot but rather using the latest tools to offer a more streamlined approach to loan origination.
This will certainly increase pull-through, which is one of the reasons more lending executives working in credit unions embracing a fully digital experience, not just for their members, but also for their loan officers and processors. When credit unions make it available to their members, they could see a big influx in new mortgage business.
With the right technology partner to help credit unions create the member experience they want and an increased focus on member marketing for the mortgage loan product, these lenders could emerge in 2025 as the lenders to beat. In fact, we’re betting they will achieve that goal.
