Ways one through three, of six: helping with first-time home buyers, speeding up the process and supporting compliance efforts.
In the measure of how consumers define full-service financial institutions, the balance certainly tips toward credit unions that make mortgages.
Credit union service organizations offer a variety of services to help credit unions without the in-house expertise and systems to deliver mortgages to their members. However, a great deal of unrealized potential exists for credit unions to take advantage of CUSOs, both in terms of realizing operational efficiencies and in expanding their ranks by offering mortgages and other products to prospective members, says Bob Dorsa, president of the American Credit Union Mortgage Association, Las Vegas, Nev.
CUSO executives offer ideas on how organizations like theirs can help credit unions offer or expand mortgage programs.
1. Better Serve First-Time Homebuyers
Roughly a third of the first mortgages First Heritage Financial, Trevose, Penn., processes for its 87 client credit unions are with millennial first-time homebuyers. Among the lessons learned from those interactions, says President/CEO John Giordano, is that many millennials are put off by being lumped into a generational norm: A 26-year-old single professional may be interested in buying a small condo rather than a house. This will leave the young person more disposable income for travel and other adventures. In contrast, a couple in their early 30s may be looking to settle down and raise a family in a more traditional starter home.
Millennials also are more racially and ethnically diverse than previous generations; 43 percent are non-white, according to the Pew Resource Center. Such distinctions underscore the need for more personalized interactions rather than assuming that a one-size-fits-all message will appeal to all prospective homeowners, Giordano suggests.
2. Deliver on Expectations for Quicker, Easier Processing
Making the mortgage process easier, quicker and more accessible via remote channels is becoming a basic expectation, especially among younger homebuyers. “They are demanding that we be faster. They want us to provide the technology so they can use their phone to buy a house,” says Greg Wischmeyer, CEO of Neighborhood Mortgage Solutions, Frankenmuth, Mich. “If credit unions don’t recognize the need to embrace technology, they are going to be left behind.”
Most of the mortgage services NMS delivers to members of 75 credit unions in 17 states are paperless, from online applications to electronic disclosures with e-signatures rolled out in the first quarter of 2017, complete with time-stamp capabilities to demonstrate compliance with regulatory requirements, Wischmeyer notes. Loan documents submitted during underwriting are also submitted, processed and stored electronically. NMS employs the loan origination system Mortgage Cadence, which is set to roll out an electronic closing process by year-end.
Big name lenders like Rocket Mortgage from Quicken Loans have reset consumers’ expectations about how easy mortgage lending can be, Giordano notes. “I think we’re getting to the point where mortgage banking has become less oriented to the relationship and more oriented to the ability to create a model that makes it easy and quick for members to use.”
Of course, Quicken is a huge company with the resources to build a new way to access consumer credit data to power quicker loan decisions. Smaller to mid-sized credit unions don’t have those resources in house, but they can look to mortgage CUSOs to take advantage of the economies of scale needed to keep pace with technology.
First Heritage Financial is working with Fannie Mae on new mortgage processes to move toward paperless lending. “There are still some steps throughout the process and at settlement where you need the borrower’s signature on paper, but the GSEs are working to make e-signatures more acceptable,” he notes.
Ultimately, a key goal in operationalizing paperless processes with e-signatures is to speed up mortgage lending. “My vision is to see if we can close loans in less than 10 business days, but of course, a lot of things have to change environmentally for that to happen,” Giordano says.
“Even if you think you have capable systems today, you should plan to reevaluate those systems on an annual basis,” he adds. “Technology is changing so quickly that you see big inroads in what mortgage technology can bring to the forefront in terms of efficiency and ease of use, both internally and externally.”
3. Tackle Compliance Quandaries
For example, one increasingly common issue is that more borrowers today do not have a personal computer, notes Daniel Sugg, chief mortgage lending officer with Michigan First Credit Union, Lathrup Village, Mich., and its mortgage CUSO, Michigan First Mortgage. Instead, they rely on smart phones and tablets.
“In the mortgage industry, some digital documents are designed only for desktop computer use. Without a personal computer, that presents a challenge, and many can’t access personal information while at work due to their companies’ Internet security settings,” Sugg notes. “That is why you still see the use of alternative forms.”
Most loan packages are offered electronically, can be mailed directly to buyers or can be signed in person. “As much as technology has grown, sometimes face-to-face interactions are still the best approach,” he adds. “Buying a home is the biggest financial decision in anyone’s life, and there are no good substitutes to having a loan officer from your credit union walk you through that process.”
Adapting to the steady stream of new rules from Fannie Mae and regulators is a big deal for all mortgage lenders. “Staying educated on this changing industry and compliance is the biggest challenge,” Wischmeyer notes. “We partner with Mortgage Cadence to help keep our credit unions educated about these changes. They have a room full of attorneys, and they guarantee a fully compliant mortgage process. And we offer webinars, white papers, and a full library of resources for our credit unions to go in and learn.”
Karen Bankston is the proprietor of Precision Prose, Eugene, Ore.