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In an ever-changing mortgage environment there is an increasing need among credit unions: the need to outsource parts of the mortgage lending process. With each passing year, regulations on mortgage lending become more stringent and it’s quickly becoming the headache of credit union operations.
There is no denying the largest benefit of offering in-house mortgage lending is that it’s in-house. Right there, on the premises, where the members are. However, it begs the question: Is proximity reason enough to bear the expense? And should a credit union be handling all aspects of mortgage lending? As the refinance boom ends and credit unions fight for every purchase loan, the answer is often an emphatic “no.”
Offering in-house mortgage lending is a seemingly profitable and convenient service, but when it’s stacked up against the hefty, and rising, costs of registered staff, yearly fees, and the cost of compliance and regulations, you might be surprised who’s coming up short.
One of the most uncomfortable elements of mortgage lending for credit unions is the sometimes violently unsteady volume the market creates. Dealing with the incredible highs and the devastating lows can be complicated not only from a compliance standpoint but also from a staffing angle. Low volumes coupled with high compliance costs are often a recipe for disaster and a stark reality. Also, declining loan volume with the same staff will drive up the cost to originate each loan. On the other hand, when volumes are at a high point, credit unions might not have the staff or resources to meet member loan demand.
Another probable nightmare for in-house mortgage lending is managing compliance. It’s no surprise that credit unions already outsource certain aspects of the process, such as disclosure and regulatory documents. But with the new CFPB regulations, especially those around the ability-to-repay rule and qualified mortgages, credit unions need options with the necessary expertise.
When considering outsourcing mortgage lending, choose an organization that:
Enter mortgage lending by credit union-owned CUSOs. It seems straightforward, but there are a significant number of credit unions that outsource their mortgage lending to banks or hand their members to a local mortgage broker, potentially giving way to the core values of credit unions and potentially opening their members to bank cross-sales.
This article originally ran on CreditUnions.com on April 7, 2014.
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December 22, 2014
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