Changing the origination process is a lot like dieting: Many dream of a slimmer,
more streamlined mortgage process, but few actually achieve any tangible results.
Paper-intensive and expensive, the typical mortgage origination costs about
$1,800 per loan and produces a paper file more than 2 inches thick.
But Boeing Employees’ Credit Union (BECU), Seattle, has now become one
of the exceptions to the rule. After implementing technology that reduced direct
origination costs from $1,200 to $350 a loan and created a whole new experience
for members, we set out to convert the rest of the credit union world.
A running history
In 1998, BECU, the nation’s fourth-largest credit union with $4.5 billion
in assets, was pretty typical in terms of its mortgage business operation. During
that year’s refinance boom, it took more than two hours to apply for a
mortgage, and we could process only three members a day. Although we had a loyal
customer base, we were closing only 30 percent to 35 percent of loan applications.
Members were practically sleeping in the lobby while waiting for their loan
to be processed.
Yet we knew that the mortgage relationship was key if we wanted to become the
member’s primary financial institution. Evidence shows that members who
finance mortgages through their credit union use more credit union services
than non-mortgage members. We risked losing future business if members found
it difficult to get a mortgage from us, and this was contrary to our mission
to promote homeownership and provide quality member service.
It was time to put our mortgage process on a new regimen and create a whole
new experience for our members.
Slimming down the required data
We set out to create a “member-centric” mortgage origination system,
and we eliminated every bit of unnecessary data from the 1003. In fact, now
members can log on to a consumer direct Web site and fill out a streamlined
1003 form (25 clicks and 10 questions).
The system helps members select the best mortgage rate and provides the estimated
closing costs. Within minutes, the member receives an online loan commitment,
translated into consumer-friendly terms, along with step-by-step instructions
for how to complete the approval process.
In Fannie Mae’s Mortgage Focus™ 2003 study (Fannie’s annual
mortgage origination benchmarking study), BECU had the lowest origination costs
per closed loan within the Internet/call-center channel—direct costs are
only $399 per loan. The average was double this—$798. And during the last
year, BECU dropped these costs even lower, to $350 per loan.
We also had the second-highest number of closed loans per direct full-time
equivalent (FTE) and originator, and we close a whopping 78 percent of all applications.
As a result, BECU has the second-highest profit margin among Fannie Mae’s
Mortgage Focus 2003 Internet/call center study participants—144.72 basis
points, based on 2002 data.
Power in partnership
Reducing the amount of required data had a huge effect on reducing processing
time. Less data means less verification, which led to slimmer files, which reduced
clutter and file space.
Huge process improvements make it easier for our loan officers to concentrate
on the member, rather than completing paper applications and hand-calculating
loan options. Originators can listen closely to member needs, ensuring a better
mortgage product fit every time.
Customer satisfaction was greatly enhanced through quick online approvals,
and during the latest refinancing frenzy, time and resource constraints were
not a problem. One member wrote, “A friend at [a top 10 lender] tells
me that loan approvals are running an average of 48 hours. I did mine online
through BECU on a Sunday and had an approval in two minutes.” Another
member wrote, “We have refinanced our house several times. This one with
BECU was by far the smoothest and most enjoyable. I was shocked that the amount
of paper we signed at closing was less than half of what you get from a regular
bank or mortgage broker.”
More than half of BECU’s closed loans originated from applications taken
over our Web site www.becuhomeloans.org,
and nearly one in every three applications is submitted to us outside of normal
business hours. While the traditional process required specialization and daily
routine work, our approach combines the jobs of originator, processor and underwriter
into one position. We have increased each staff member’s authority to
Exercising New Ideas
Prime Alliance Solutions Inc., Tukwila, Washington, our partnership with technology
leader Dexma Inc., Minneapolis, and Fannie Mae, has caught on faster than the
low-carb diet craze. It’s now the premier provider of technology-enabled
mortgage business solutions for the credit union industry, and is handling one
of every four loans originated by credit unions.
Credit unions of all sizes now have easy access to this business solution through
Prime Alliance’s relationships with mortgage companies that serve credit
unions and CUSOs. Regardless of the interest rate environment, Prime Alliance
will continue to grow both in the number of mortgage transactions it facilitates
as well as the number of customers it serves—we project by year-end we’ll
grow to a total of 84 credit union customers serving approximately 1,000 credit
unions. And thanks to Dexma’s continuing innovation, we will continue
to take steps, time and money out of the loan process.
For information about how the Prime Alliance partnership makes this solution
here for a more detailed report