Why and how to continue providing mortgage products to your members
By Dennis F. Hardiman
Many credit unions are considering exiting the mortgage business, and some have already done so. The risks of making mortgages have greatly increased, the cost to originate is at an all-time high, and new regulatory guidelines have created a more complex lending environment than ever before. Many credit unions have decided that because of those factors, the risks outweigh the rewards of offering mortgages. The challenge with exiting the lending business, however, is that members expect their credit union to offer mortgage products. Members today are more likely to shift their loyalties to a financial institution that does offer the products they want and expect. Even if a member goes to another institution only for his mortgage, the rest of his credit union accounts become at risk because that other institution will be aggressively cross-selling to your member. In a time when consumer expectations and behaviors are rapidly evolving, financial institutions must focus on creating value for their members in order to keep them--something credit unions have prided themselves on. However, credit unions are now facing a conundrum: The value and need to provide mortgage products to their members vs. delivering mortgage products in today’s risk-filled lending environment. A solution can be found in outsourcing your lending operations. Not only does outsourcing provide a favorable option because of potential cost savings, it also can help credit unions comply with regulations and avoid fines. The swirl of new Consumer Financial Protection Bureau guidelines coupled with increased documentation and reporting means that an entire team of experts and attorneys could easily be useful in managing the changes. But outsourcing does not come without its own challenges. If the wrong partner is selected, member service could suffer. To ensure your credit union’s long-term success, providing an outstanding member experience is crucial; therefore, you should ask potential third-party providers about their satisfaction levels. Credit unions should also look for providers that are member-centric vs. process-centric. Too many organizations focus on optimizing mortgage workflow and fail to manage the member experience, which could be detrimental and force existing members to switch financial institutions. In addition to poor member service, outsourcing can also open your institution up to competitive challenges. If your outsourced partner is another financial institution, you can fully expect the institution to cross-sell services beyond mortgage products to your member base. This puts your credit union at risk of losing members. Credit unions must carefully consider the dangers of exiting the mortgage business and the potential impact it would have on the member base. While outsourcing your lending operations may be an option for retaining these products and members, it must also be carefully considered to avoid a decline in member satisfaction or losing members completely. There are best practices to follow in outsourcing, and the wisest credit unions will make note.
Dennis F. Hardiman is founder and CEO of Embrace Home Loans, an approved lender for FHA and VA and an approved seller servicer for FNMA, FHLMC and GNMA. You may also be interested in reading "On Compliance: FHA's e-signature policy update" and "On Compliance: Qualified Mortgages." Also read "Juggling Priorities: Funding innovation requires making good tech investments and efficiently managing current vendors," and "On Compliance: The new outsourcing standard." Attend CUES School of Consumer Lending in Denver Sept. 15-16.
