A new approach to mortgage lending has been taking shape over the last few years. In an effort to build effective relationships with realtors, a few credit unions across the country have established an opt-in realtor program.
The program begins with a question. At some point during the loan process, the loan officer asks the loan applicant(s) if they have a realtor. If the answer is yes, the conversation turns to a different topic. However, if the answer is no, the loan officer recommends the credit union’s realtor program.
The program helps members identify realtors who have elected to participate. These realtors receive leads from the credit union with the expectation that the realtors will recommend that their clients seek financing from the credit union. The catch is that the realtors return a small portion of their commission back to the member.
There are several different approaches that credit unions can take as they seek to develop a mortgage rebate program to encourage realtor loyalty and participation, two of the most successful are highlighted below.
BECU ($5.8B, Seattle, WA)
Before implementing the mortgage rebate program, BECU would pre-approve many of its members and: a) refer them to a real estate professional from a list of agents that were doing business with the credit union, or b) provide the members with the list so that they could have the opportunity to choose one on their own.
Unfortunately, the credit union realized when following up with members that oftentimes they had moved their loan to the lender that the agent most favored. BECU also had a number of members who were pre-approved, but were not actively looking for a home. “The question was, how could we come up with a service that would add value to our members and give us more of a guarantee that we would retain their business,” said Marie Nunley, realtor development manager.
To meet the challenge, the credit union created BECU Real Estate Services. “The program is primarily meant for first-time homebuyers who do not have an existing relationship with a real estate professional,” said Nunley. The agent benefits by having leads on people that are pre-approved and ready to buy a house. The member benefits by have a member advocate and real estate professional dedicated to making sure the home buying experience is smooth and frustration free.
Real estate professionals who are chosen to participate in the program have excellent people skills and are knowledgeable in their industry. “They take the time to ensure the clients’ needs are met and they are buying the home of their dreams,” said Nunley.
In this approach, the manager of real estate services works with a prospective broker to determine who in the office would best match the philosophy of the credit union. The selected real estate professionals who participate in the program attend a training program during which BECU staff discuss the credit union’s culture, mortgage products, member services and the real estate services program. “We currently have 65 active agents in our program,” said Nunley. “This is a value-added service that is a win-win situation for all.”
Credit union members who enroll in the program receive a rebate from the agent's commission. For example, on a $200,000 house, the rebate would be $1,080, or about 18 percent of an agent’s 3 percent commission. In addition, BECU credits $250 to the member's closing costs. “I enrolled in BECU Real Estate Services myself and purchased a home. I used the rebate to make my first month’s mortgage payment, which I always highlight during our monthly homebuyer seminars,” said Nunley.
Bethpage Federal Credit Union ($2.2B, Bethpage, NY)
Bethpage’s interest in a mortgage rebate program began with its desire to increase its mortgage business and provide a one-stop shop to meet all their members’ financing needs. “The challenge is having the members return to the credit union for financing with the multitude of opportunities available in the New York area,” said Mortgage Manager Maria Tullo. “Members will not select a financing option based on institutional loyalty; it is for the product/program and price.”
Bethpage formed CU Realty of New York, a Credit Union Service Organization (CUSO), in partnership with CU Realty and four other credit unions in New York: Suffolk FCU ($685M), Nassau Educators FCU ($949M), Oceanside Christopher FCU ($126M) and North Shore Health System FCU ($43M).
The CU Realty rebate model is different from the BECU approach. Through the CU Realty program, (assuming a $400,000 house, the median house price in Bethpage’s area and a realtor commission of 2 percent) the member would receive a rebate of approximately $2,300. However, the member must be working with a CU Realty approved agent to receive the rebate according to Tullo.
Currently, there are over 30 active agents in the CU Realty program. Bethpage Federal Credit Union is trying to expand its network both within CU Realty and among realtors who choose not to participate in the rebate program.
As several credit unions switch to an open charter field of membership, they are facing challenges alerting the public that they offer mortgages in the first place. By actively developing a referral network with realtors and brokers, credit unions can increase their community presence and publicize their mortgage program.