Last week, the Federal Reserve unanimously passed mortgage lending rules designed to cease the past abuses of some lenders in the mortgage lending industry. Amendments to Regulation Z (or Truth in Lending), these new rules ensure borrowers can afford their mortgage payments, limit prepayment penalties and other fees, and guarantee a good-faith estimate of all loan costs.
Because of these amendments, lenders who previously did not abide by these business practices must incorporate these changes to benefit borrowers. Adopting these changes may be costly for those lenders since loans will now require more underwriting, while revenue may decrease, with some fees eliminated and prepayment penalties tightly controlled.
While lenders work through these adjustments, credit unions have a fresh opportunity to grow their mortgage business. This creates a strong motivation for credit unions to further develop and refine their mortgage delivery channels, whether online, through realtor networks, or branches. As this mortgage opportunity continues to present itself, credit unions should not delay in leveraging their clear advantages.
The #1 Resource for Housing and Mortgage Information
Enhancing their online presence is key for credit unions to communicate their competitive advantages. The internet continually increases its importance as a trusted resource for consumers researching their housing and mortgage options. In 2007, 84 percent of home purchasers used the internet as a resource in searching for a home. In addition, a survey by the Mortgage Bankers Association School of Banking notes that 43 percent of consumers will prefer the internet as their retail mortgage channel by 2011. Retail loan officers are the next closest retail mortgage channel at 17 percent.
XFCU Delves into the Online Channel
One credit union implemented an online origination tool to increase internal efficiencies and strengthen the online presence of their mortgage offerings. In 2004, Xceed Financial Credit Union ($778M, El Segundo, CA) partnered with Mortgagebot (a provider of internet solutions for the mortgage lending industry) to implement their online technology, with immediate and positive results. Their prior operation consisted of loan officers having to mail mortgage applications overnight, with completed applications processed by the operations department the next day. Now, loan officers, member service representatives, and members can all input mortgage applications through the online channel, and have them processed, in hours, not days.
With the information now automatically sent to operations for processing, errors are diminished and efficiency increased. Lag time between the submission of the application and the loan decision has dramatically decreased. Because of this faster turnaround time, Xceed Financial can capture more business, as the borrower is less likely to turn to another lender while waiting for approval. Loan volume has increased for two reasons: more borrowers stick with the credit union through the application process thanks to the turnaround decrease and increased efficiencies. Secondly, the online presence of their mortgage program and application is more appealing to interested borrowers, increasing the possibility that Xceed Financial will win the business.
To learn how Xceed Financial made mortgage lending an organization-wide initiative with this online platform, join us for Optimizing Delivery Channels to Drive Mortgage Growth, a webinar event brought to you by Callahan & Associates.