Despite the recent turmoil in the mortgage lending industry, mortgages remain an area of strength in the credit union loan portfolio. As of September 2007, credit unions together originated $41.3 billion in mortgage loans, up 8.5% over last year. This brings the industry share of the total mortgage market to 2.4% , the highest level ever.
The current environment offers credit unions an opportunity to position themselves as both a trustworthy information resource as well as a reliable lender. The credit union website is one of the first resources members use for information and help with their financing needs, and credit unions must ensure that their website provides the right tools and information.
In a recent online survey conducted by Callahan’s Internet Strategy Consortium, online members expressed a variety of concerns regarding the housing market and provided insight into their future information needs. Despite the wealth of information available online, members want better information and they want it from a trusted resource. The results of the survey provide guidance for credit unions looking to become this trusted resource and help their members with their mortgage needs. Turn the page to find out what we learned.
Different Members; Different Needs
The majority (62%) of members expressed some level of concern related to the mortgage and housing industry. The top two issues weighing on members’ minds are the value of their home (31%) and rising interest rates (29%). Concerns varied by age and income.
• Members over 30 are more likely to express concern over housing values;
• Younger members are more concerned about aspects relating to a future home purchase, such as down payments, qualifying for a mortgage, and finding affordable housing;
• Members with lower income levels have greater concerns regarding qualifying for a loan and monthly payments;
• Members who are interested in refinancing have concerns regarding their home value, rising interest rates, and their ability to make monthly payments.
Why Members Go Online
Overall, more than 6 in 10 online members reported doing research online related to financing a home or refinancing a mortgage loan, underscoring the importance of a credit union’s ability to reach targeted segments online. Members who expressed concerns in a related housing area were more likely to have gone online. This varies to some extent by age – members older than age 65 were least likely to have gone online to conduct research in a particular area. It also varies by income, with 57% of members with incomes over $100K turning to the online channel for information.
The primary goal for conducting mortgage research online was to obtain refinancing information. Another 37% were looking for information related to a home purchase, with half of these being first-time home buyers (18%). About half of the all current mortgage holders reported looking for information online, with 24% saying they were looking for refinancing information, primarily ARM holders. One-fifth reported they were just doing basic research. Goals varied by both age and income, so understanding the needs of your particular membership is critical.
The Credit Union Challenge
Members consider finding the best loan type to meet their needs (44%) and understanding fees (44%) to be the most challenging aspects of looking for mortgage information online, followed by finding reliable rate information (40%). Differences in challenges based on research goals and experience demonstrate the need for targeted and more thorough information online. Current mortgage holders expressed difficulties similar to those without mortgages, indicating that the process doesn’t get any easier with practice!
More ARM holders cited difficulty in comparing offers and finding reliable rate information. Although most members go online looking specifically for rate information, many consider finding reliable rates to be a challenge (40%). About one-fifth of members cited difficulty in communicating with their credit union, either getting answers to their questions about online information or reaching someone regarding an online loan application.
The Credit Union Opportunity
Credit unions that understand how their members conduct research online will be more likely to attract their members’ mortgage loan business. While members with different financing goals have different information needs, credit union websites can be structured so members can easily find the information relevant to them once you understand the different market segments you serve. Credit unions should also leverage two key points of differentiation:
Many members expressed difficulty in understanding fee structures. However, while members claim that fees are critical in their decision-making process, it is not clear whether they are truly doing the research to make an accurate comparison. Many lender websites do not provide a list of fees, and it is not known whether members are actually taking the step of contacting lenders to obtain this critical piece of information. Members could be making comparisons that are not valid, particularly as some lenders bundle fees differently.
Fees are traditionally an area where credit unions have an advantage over banks. (The recent increase in Bank of America’s ATM further illustrates this point.) Credit unions can market this advantage by not only clearly outlining their own fee structure on their website, but by also including a comparison to other local and national lenders. (The survey asked members where they currently finance their mortgages giving the participating credit unions a list of comparisons to provide). Credit unions should provide unbiased, third-party content discussing various fees and helping members ask lenders the right questions to make accurate comparisons. Additionally, providing updated information to reflect the current market conditions can help members during this time of rising concerns in the housing market.
2. The Value of Membership
Members are still turning to other lenders for mortgage loans, so credit unions need to evaluate how they reach existing members in the purchase or refinancing stages. Certainly relationship-based pricing and rewards programs help provide a more concrete illustration of the benefits of membership. But there are other ways to make members feel that they are valued and that their existing relationship is recognized. Some examples include:
• Educational programs for home buyers
• Streamlined loan application process (online or offline)
• Ability to get information/updates as the loan is processed
• Discounts on fees for automatic payments or online payments
• Programs offering review of mortgages with other lenders to find refinancing opportunities
The survey data shows that members are far more likely to consider the credit union for their next mortgage or refinanced mortgage compared to other potential mortgage lenders. These results, combined with the current state of the mortgage market, underscore the opportunity today for credit unions to reinforce this predisposition through the online channel. Offering more detailed information online will not only help members make better financial decisions, but increase their likelihood to turn to the credit union for additional products and services.