Credit unions can win over banks in this area.
By Nicole Hamilton
Credit unions have a unique opportunity to capture new members and market share around home ownership, and a distinct competitive advantage over other institutions to do so. Americans have much of their money in their homes. In fact, 80 percent of home owners have 66 percent of their net worth in the equity on their house, according to the Century Foundation's white paper: A Tale of Two Recoveries. This makes their home by far their largest investment. Yet the statistics on how much people understand about mortgage concepts are grim. Mortgages are complex, but are often sold simply, with the focus on interest rate and monthly payment. In addition, few home buyers are aware of how much equity they might have in their homes in the future, given different available products and offers, or what the trade-offs are with regard to overall cost of the loan. Mortgage originators need to be concerned with ability to pay, and the qualification standards are high these days, preventing precarious financial commitments that many homeowners found themselves in during the pre-mortgage crash. Banks that originate mortgages are generally focused on mortgage origination volume, and keeping their complaints and production costs down, but not necessarily on creating educated customers or optimizing those customers' long-term financial outcomes well into the future. This area of competing priorities is precisely where the opportunity for credit unions lies. Credit unions are uniquely positioned to provide leadership to their customers around what is often the biggest financial decision of their lives – buying a home. And, with their customers who are already homeowners, credit unions can provide an incredible level of insight into what is often their largest asset, well beyond what traditional banks provide. What if every credit union customer who got a mortgage could understand the range of options presented, along with the effects on their financial future, as well as the trade-offs of equity vs.overall loan cost? What if every credit union customer who owns a home understood all the ways in which they could optimize their current home financing to achieve their financial goals? This type of insight and transparency isn’t provided by the major banks. But technology exists that can provide insight and clarity into home ownership scenarios, and that can allow credit unions to reframe home buying and refinancing as opportunities to provide optimal long-term financial outcomes for their borrowers. As tech-savvy, transparency-seeking Millennials become the largest group of new home-buyers in the coming years, using technology to provide this information around home ownership will be a powerful catalyst for attracting future credit union customers. For home-buyers of all demographics, credit unions can position themselves as a mortgage originator dedicated to customer financial outcomes and, most important, interested in increasing their members’ long-term net worth. CUs can help home owners tap into otherwise unseen origination opportunities by creating transparency around ways to achieve financial goals with their existing homes: wealth accumulation, reduction in monthly expenses, purchase of a second home, retirement, or relieving unanticipated financial pressures. I believe the most effective way to get this information out to members is a combination of giving the member a dashboard from which to choose and making it known to the members that the credit union can help them with opportunities. CUs also can set opportunity notifications and make sure members know how they can improve their financial condition while homeowners. Credit unions that provide transparency and control to their members around home ownership can increase their membership, further enhance their value to their members, and boost their origination volume.
Nicole Hamilton is CEO of Tactile Finance, which sells solutions that let professionals provide optimal consumer real estate outcomes to their clients, giving clarity to home buyers and home owners, increasing customer satisfaction, and driving revenue through uncovering new business opportunities. You might also be interested in reading this Loan Zone column about how to make your mortgages more "memberlicious" in 2014.
