Mortgage Lending Provides Important Credit Union Growth Opportunity

by Roger Hull
Mortgage Lending Provides Important Credit Union Growth Opportunity

Growth is a primary objective of any business, including credit unions.

Growth is a prerequisite for better service because it provides the resources that allow the institution to innovate and improve. It also prevents or hinders competitors from taking market share that could result in reduced membership and fewer resources to spend on products and services.

A new source of growth

Recently, CUNA reported that credit union growth is slowing and pointed to a slowdown in auto lending as the reason. According to the Federal Reserve Bank of New York’s Center for Microeconomic Data, the application rate for new auto loans was 12.0% in June 2019, down 2% from June of the previous year.

Auto lending remains a highly profitable business and modern technology makes it easy for credit unions that write these loans to expand their relationship with new members coming in from auto dealerships. But credit unions still need another engine for growth. Fortunately, they can attract new business easily by adding one additional product—the mortgage loan.

While there are many kinds of home mortgage loans credit unions can offer its members, perhaps one of the most straightforward is the home equity loan or home equity line of credit.

More akin to consumer loans than home loans, the home equity transaction is far simpler than the purchase money transaction, but it provides all of the data and insight into the member’s financial condition. Right now, this business is easy to win.

Currently, homeowners have access to a tremendous amount of equity in their homes and they would like to tap into it for their own use. According to Harvard’s Joint Center for Housing Studies, aggregate home equity more than doubled from $ 7 trillion in 2011 to $15.5 trillion in 2018.

There are additional benefits to mortgage lending beyond organic growth, primarily related to the vast amount of personal financial data the borrower will share with the credit union during the process. These include a deeper relationship with the member, especially when the credit union services the mortgage; more frequent reasons to contact and communicate with the member; and higher lifetime value in the member relationship.

Leveraging Next Gen lending technology

However, credit unions need to implement lending technology that meets evolving consumer demands and expectations, increase the overall efficiency of the mortgage loan origination process, and keep members engaged from application through to the closing table.

Loan origination technology, such as the Origence mortgage lending platform, created specifically to meet the needs of today’s credit unions, offers a number of key benefits:

A reimagined borrower experience from the point-of-sale all the way to closing, realized by streamlining and automating the entire lending journey. This makes it easy to grow organically by providing the same great experience the credit union always provides its members.

A more efficient origination process, through intelligent use of automation focused on cycle time reduction and staff productivity. This allows the mortgage product to be a great engine for growth by attracting new members who want to access their home equity.

An integrated lead management solution, that keeps borrowers on track, increasing purchase close rate and throughput. This means that the credit union can acquire fewer technology solutions to meet its growth goals.

The technology available today has opened up new opportunities for credit union profitability by replacing manual steps in the origination process with an automated enterprise solution. This makes home finance a fundamental—if not essential—product to add to a credit union’s offerings menu, making growth an achievable objective.

About the Author

Roger Hull
Roger Hull is the chief product officer at CU Direct, where he oversees strategic planning and product development, including portfolio analytics and advisory services. Additionally, he oversees software development and implementation for all automotive and lending solutions. Roger has more than 30 years of strategic leadership experience in the mortgage and technology industries.