By Ray Birch
ONTARIO, Calif.—The mortgage market has moved right into credit unions’ sweet spot, according to one expert, who adds that if CUs are to capitalize on the shift they must begin offering new solutions.
To do just that, CU Direct has now officially introduced a new platform, Origence, aimed at helping credit unions not just capture mortgage loans, but do so in a market in which a number of name brand lenders have given the impression a home loan can be had in a matter of minutes.
Roger Hull, chief product officer at CU Direct, noted big banks have traditionally dominated the refinance market, which has been slowing, while credit unions have typically done better with first mortgage loans, which have been increasing.
“Credit unions have about an 8% share of the overall first mortgage market today, and that percentage has grown slightly over the last few years,” explained Hull. “That’s what you’d expect as we shift away from a predominately refi market to more of a purchase market. And while credit unions have always done better in a purchase market, quite frankly they could have a much bigger market share—but there are some things they need to offer to get that.”
Getting Aggressive
One area of mortgage lending cooperatives need to address more aggressively is online mortgage lending, according to Hull, who said that while CUs have moved quickly into the consumer lending space to automate lending and keep pace with competitors, particularly fintechs, they have lagged in their online mortgage offerings.
“Quicken and many others have implemented consumer direct digital channels where the borrower can do all or most of their mortgage transaction online,” said Hull.
Hull estimated the typical CU mortgage loan takes 50 days to close—from application to funding.
“That’s just not meeting consumers’ expectations today,” he said. “They're expecting the process to take less than 30 days. I have seen data that indicates only about 13% of credit union first mortgage loans are completed in 30 days or less.”
That low close rate is just one of the obstacles credit unions need to overcome to gain a larger share of the purchase market, which is not expanding in volume, noted Hull. He said the market will be challenging as competitors fight to take share from each other.
A ‘Strong Opportunity’
“The market is not expanding, it's either flat or slightly declining,” Hull said. “But I do think there is a strong opportunity for credit unions to gain a larger share of what I will call a static market over the next three to four years.”
What’s needed, said Hull, is a “member portal” that enables a borrower to “efficiently navigate the mortgage origination process. We really break that down into three separate experiences. One is a shopping experience, where a consumer can put in just four to five sets of data and actually run a pricing engine and get a quote back for all the various loan programs they are eligible for. This is done without any assistance from the credit union.”
Next, the portal should offer a comparison feature that can help the borrower determine among all the CU’s loan programs they are considering which one is the most desirable for them.
“And that should take three minutes or less,” Hull said. “I think one of the keys is meeting consumer expectations of being able to get answers quickly.”
15 Minutes or Less
When members finally make a decision to move forward with the loan, the portal should enable them to complete the loan application process online in 15 minutes or less, Hull added.
The portal should also allow for the secure and quick exchange of mortgage documents, including submission of borrowers’ income data, between the CU and member.
“You need a great deal of automation on the back end to reduce cycle time,” said Hull. “You need a loan origination system (LOS) that is state of the art, that delivers the necessary automation that eliminates a great deal of the manual effort behind originating and closing a mortgage loan.”
As CUToday.info first reported here, CU Direct has been working to develop a new mortgage LOS, Origence. The Origence plaform is now in the market.
“The new platform provides a great member experience with a state-of-the-art point of sales system and credit union staff experience with the backend LOS,” he said.
A ‘Discovery Period’
Hull said he believes many credit unions are going through a “discovery period” when it comes to automating their mortgage lending.
“I think heretofore some of the technology offerings of credit unions have not fulfilled the key criteria I just described,” said Hull, noting credit unions have been quick to automate their consumer lending offerings. “Credit unions are very good with auto lending—the whole consumer shopping experience on the front end, the quick application and then the final approval. It’s fast and done without the credit union having to do anything. They need to bring more of that to the first mortgage world—and with our new Origence platform we are helping them do that.”