In Prime Condition

Changing the origination process is a lot like dieting: Many dream of a slimmer, more streamlined mortgage process, but few actually achieve any tangible results. Learn how BECU turned this dream into a success story

 

By Mortgage Cadence

 

Changing the origination process is a lot like dieting: Many dream of a slimmer, more streamlined mortgage process, but few actually achieve any tangible results. Paper-intensive and expensive, the typical mortgage origination costs about $1,800 per loan and produces a paper file more than 2 inches thick.

But Boeing Employees’ Credit Union (BECU), Seattle, has now become one of the exceptions to the rule. After implementing technology that reduced direct origination costs from $1,200 to $350 a loan and created a whole new experience for members, we set out to convert the rest of the credit union world.

A running history

In 1998, BECU, the nation’s fourth-largest credit union with $4.5 billion in assets, was pretty typical in terms of its mortgage business operation. During that year’s refinance boom, it took more than two hours to apply for a mortgage, and we could process only three members a day. Although we had a loyal customer base, we were closing only 30 percent to 35 percent of loan applications. Members were practically sleeping in the lobby while waiting for their loan to be processed.

Yet we knew that the mortgage relationship was key if we wanted to become the member’s primary financial institution. Evidence shows that members who finance mortgages through their credit union use more credit union services than non-mortgage members. We risked losing future business if members found it difficult to get a mortgage from us, and this was contrary to our mission to promote homeownership and provide quality member service.

It was time to put our mortgage process on a new regimen and create a whole new experience for our members.

Slimming down the required data

We set out to create a “member-centric” mortgage origination system, and we eliminated every bit of unnecessary data from the 1003. In fact, now members can log on to a consumer direct Web site and fill out a streamlined 1003 form (25 clicks and 10 questions).

The system helps members select the best mortgage rate and provides the estimated closing costs. Within minutes, the member receives an online loan commitment, translated into consumer-friendly terms, along with step-by-step instructions for how to complete the approval process.

In Fannie Mae’s Mortgage Focus™ 2003 study (Fannie’s annual mortgage origination benchmarking study), BECU had the lowest origination costs per closed loan within the Internet/call-center channel—direct costs are only $399 per loan. The average was double this—$798. And during the last year, BECU dropped these costs even lower, to $350 per loan.

We also had the second-highest number of closed loans per direct full-time equivalent (FTE) and originator, and we close a whopping 78 percent of all applications. As a result, BECU has the second-highest profit margin among Fannie Mae’s Mortgage Focus 2003 Internet/call center study participants—144.72 basis points, based on 2002 data.

Power in partnership

Reducing the amount of required data had a huge effect on reducing processing time. Less data means less verification, which led to slimmer files, which reduced clutter and file space.

Huge process improvements make it easier for our loan officers to concentrate on the member, rather than completing paper applications and hand-calculating loan options. Originators can listen closely to member needs, ensuring a better mortgage product fit every time.

Customer satisfaction was greatly enhanced through quick online approvals, and during the latest refinancing frenzy, time and resource constraints were not a problem. One member wrote, “A friend at [a top 10 lender] tells me that loan approvals are running an average of 48 hours. I did mine online through BECU on a Sunday and had an approval in two minutes.” Another member wrote, “We have refinanced our house several times. This one with BECU was by far the smoothest and most enjoyable. I was shocked that the amount of paper we signed at closing was less than half of what you get from a regular bank or mortgage broker.”

More than half of BECU’s closed loans originated from applications taken over our Web site www.becuhomeloans.org, and nearly one in every three applications is submitted to us outside of normal business hours. While the traditional process required specialization and daily routine work, our approach combines the jobs of originator, processor and underwriter into one position. We have increased each staff member’s authority to close loans.

Exercising New Ideas

Prime Alliance Solutions Inc., Tukwila, Washington, our partnership with technology leader Dexma Inc., Minneapolis, and Fannie Mae, has caught on faster than the low-carb diet craze. It’s now the premier provider of technology-enabled mortgage business solutions for the credit union industry, and is handling one of every four loans originated by credit unions.

Credit unions of all sizes now have easy access to this business solution through Prime Alliance’s relationships with mortgage companies that serve credit unions and CUSOs. Regardless of the interest rate environment, Prime Alliance will continue to grow both in the number of mortgage transactions it facilitates as well as the number of customers it serves—we project by year-end we’ll grow to a total of 84 credit union customers serving approximately 1,000 credit unions. And thanks to Dexma’s continuing innovation, we will continue to take steps, time and money out of the loan process.

For information about how the Prime Alliance partnership makes this solution possible, click here for a more detailed report

 

This sponsored content article is provided to the credit union community for shared insights and knowledge from a recognized solutions provider in the industry. Please note that the views and opinions offered here do not reflect those of Callahan & Associates, and Callahan does not endorse vendors or the solutions they offer.

If you are interested in contributing an article on CreditUnions.com, please contact our Callahan Media team at ads@creditunions.com or 1-800-446-7453.

 

June 28, 2004


Comments

 
 
 
  • Typical advertisement. Why did the member refinance his house several times? Did each loan orgination generate more income for the loan officer each time? Didn't the loan officer ask the right questions of the member the first time and get it right once? Sorry, I was in the mortgage business and this is a typical way fleece the uninformed public
    Anonymous
     
     
     
  • Very Informative Article !
    Anonymous
     
     
     
  • Very Informative Article
    Anonymous