Is Your Mortgage Experience Designed for Today’s Borrowers?
April 18, 2018
If you’re not already taking a closer look at the real estate lending side of your business, there are plenty of reasons to do so. Home shortages, rising rates, competition, and tax law changes are some of the forces at work that warrant a renewed look at mortgage lending. Many credit unions will find they have to fight harder for their share of the mortgage lending market.
Does your mortgage experience hit the nail on the head for today’s borrowers?
From the purchaser’s point of view, low housing inventories are pushing many to consider homes that are priced higher than they had initially 
intended. In addition, they need to be able to move quickly before homes are snapped up. Think through what first-time buyers are facing – lack of inventory in their price range, higher payments, short timelines – and figure out how you can help them navigate. Consider that in a shortage, sellers don’t want to wait for financing – and don’t have to. A speedy lending process makes it easier for buyers to jump on deals.
From the refinancer’s point of view, refinancing to lower the rate or payment has mostly run its course, which has been slowing the refinance market for quite some time. Those who would like to refinance, but have not, may have issues with their credit or loan-to-value ratio. Are there situations where you would lend to some of those members? Do you have any products geared for those situations, assuming you have consciously chosen to shoulder the additional risk?
As rising home prices boost homeowners’ equity, home equity lines of credit and fixed rate second mortgages will continue to meet the needs of many who would like to make use of that equity. Some of those who previously would have sought a home equity loan may be more interested in a cash-out refinance now that the tax laws are stricter on mortgage interest deductions. Are those members aware of how you can serve them?
Take all of these market shifts, and view them under the umbrella of tougher competition sparked by fewer originations and new entrants into the market. Here are some thought-provoking questions to consider as you formulate your responses to these changes:
- Have you identified and found ways to meet the changing needs of borrowers? Start with the needs mentioned previously and add others as you identify them.
- Should the credit union consciously shift focus from refinances to purchases? This goes beyond marketing. For example, the target market may shift toward real estate agents. Think through what agents want for their clients in this market and how you can turn that into a value proposition for agents. Consider how members shop for homes today. How is it different from a few years ago? How can you become part of the buyer’s process and establish a relationship earlier?
- Have you considered implementing changes in your lending processes to take advantage of new legislation? Laws are changing at the local, state, and federal levels, and in the current climate many of them represent the easing of regulations and the ability to make mortgage lending less paper driven.
- What is unique about your market? Use that knowledge to shift marketing focus, design products, and alter your processes to better serve your members and truly stand out in the crowd.
- What does the competition offer that you don’t? You do not need to, nor should you, try to match every value proposition that is offered by competitors. But you should have a candid idea of what borrowers have to choose from. Don’t forget non-traditional lenders – your members haven’t.
Today’s mortgage market is not the same market that it was a year or two ago. Given the changing situation for consumers, combined with the highly competitive mortgage market, you should keep answering the question, Why should someone get a real estate loan with you instead of your competition? The answer must be clear and brutally honest. If there’s not a good enough reason, that’s your cue to figure out how to create one, because that reason is one of the keys to sustainable success.
