While attending last month's CU Housing RoundTable meeting graciously hosted by Navy FCU, I mused about credit unions, real estate lending and, the topic of the day: growing credit union market share from our existing 2% market share to 10% market share in the next 10 years, or “2 to 10 in 10”. You’ll recall that the initial CU Housing RoundTable was held last May. The outcome of the day-and-a-half discussion was four Big, Hairy Audacious Goals, “BHAGs” for short. The biggest BHAG of all is increasing credit union market share.
What got me thinking was a question about mortgage brokers. Mortgage brokers, command between 30% to 40% market share every year. That’s not news. This is: brokers are old-school. Many originate with a paper application (the 1003), a pencil and a calculator. They’re not in control of the process like credit unions are. And they’re expensive.
That's right, expensive. I'll bet you a quarter (limited to the first 400 people to respond) that your credit union's closing costs are lower than the brokers in your area. And not by a little bit. I know, from years of comparisons, that credit unions are the low closing cost provider. So confident am I that I'll put a Ben Franklin - - twenty-five cents at a time - - on the line to anyone who can prove me wrong.
Remember, we're talking fees, not rates. National studies show credit union mortgage rates aren't all that different from our competition. Why? Because most mortgage lenders set their rates using the secondary market as a guidepost. Don't get me wrong, many credit unions also offer lower rates in addition to the lowest available closing costs. But I am focused on closing cots for one simple reason: the amount of money members bring to the closing table for a broker loan can be significantly higher. It's an affordability issue, plain and simple.
My point is this: Members use brokers because brokers are relentless. Once introduced to a borrower, the typical broker is loath to lose a deal. Keeping the borrower close, through constant communication, is their forte. They'll do everything possible to get a loan closed, including matching borrowers with products that aren't good for them in either the short- or longer term. If an option ARM gets the deal done, then an option ARM it is. Why? Brokers only get paid when loans close. Just ask your members, the ones who are desperately trying to refinance their way out of option ARMs and other exotic mortgage products, how they found their way into these undesirable programs. The most common answer: a mortgage broker.
If brokers are relentless, then credit unions are earnest – and honest. We want what's best for members, which is financing their home at their credit union. Yet we’re not good at the basics: we don’t do a good job of staying in touch, of keeping members informed. That’s how the brokerage community beats credit unions, it’s that simple. If we want to grow market share, if we want to help more members become homeowners more affordably, we need to become relentless communicators. Communicate often, communicate the credit union difference, communicate the credit union value proposition, show members in exact terms how significant the credit union financial difference is.
Earnest and relentless are both good. Credit unions have the money, process and quality advantage, along with the product and relationship advantages. From where I sit that's a five to one advantage. Now let's add relentless to our list. The result: we'll save members thousands of dollars. We'll also solidify relationships with members, and grow our share of the market to the 10% we're after within the next ten years.
So what are we waiting for? Good question. Seems to me we’ve been looking for THE answer, the Holy Grail that will make our members flock to us for all their home financing and real estate needs. THE answer is that THE answer is actually a number of answers. When competing with the broker community, THE answer is consistent member communication. Consistent communication with real estate agents is helpful as well. Interested in other components of THE answer? Watch www.creditunions.com for more ideas.
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