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By MGIC - Mortgage Guaranty Insurance Corporation
This year, the mortgage market is projected to be $1.3 trillion, with 60% of that activity expected to be in refinances. In 2014, the market is projected at just over $1 trillion, with a mere 30% of the activity in refinances.
If your institution is currently at 80% to 90% refinance, how will you replace that fee income when the refinances dry up? What is your plan to maintain your mortgage volume over the next few years of rising interest rates?
For many, the answer to these questions lies in creating and executing a purchase money strategy within your credit union. While purchase loans cost, on average, two to three times more to originate, process, and close than refinances, they are the backbone of a consistent, profitable mortgage operation.
Besides being the prudent thing to do financially, focusing on purchase business is in the best interest of members. Buying a first home can be an anxiety-filled experience. Not knowing who to trust and providing so much personal information is unnerving for borrowers.
Because buying a home is so emotional, your members deserve the special treatment that only the credit union can provide. To originate their mortgage is to provide borrowers the cornerstone of their financial world.
Whether the motivation is to ensure a continued revenue stream from the mortgage department, or to provide members with the financial services and products that change their world, credit unions must focus their mortgage efforts on purchase business moving forward.
It is a cold hard truth that these loans are more difficult to earn from consumers. Why? Because the purchase market is dominated by aggressive loan officers who have deep relationships with real estate agents.
However, credit unions are not without their own advantages in this space. Below are several ways that cooperatives can more effectively fill the pipeline with purchase loans.
Between inevitable rising interest rates, appreciating home prices, and the pent up demand of people who have put off purchasing their first home or their move-up home over the past few years, now is the best time for credit unions to create and execute a purchase money strategy.
Chris Perry is the national credit union manager for MGIC. He has been in the mortgage business for more than 20 years now, and would be happy to discuss how he can help you fill your pipeline with purchase loans. Contact him at firstname.lastname@example.org or 1- (800) 634-8256, x7026.
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.
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May 6, 2013
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