Credit unions retained two percent market share of mortgage originations as of the third quarter according to data from Callahan & Associates and the Mortgage Bankers Association. While the credit union industry was on pace in 2005 to reach $59.2 billion in origination volume, it is nowhere near the $80.1 billion volume and 2.8 percent market share it enjoyed in 2003 during the height of the refinancing boom.
Credit unions must develop new strategies to actively pursue the purchase market in the coming year. The purchase market is projected to become 65 percent of mortgage originations in 2006 from 53 percent in 2005 and 34 percent in 2003 according to the Mortgage Bankers Association.
Credit unions’ New Year’s resolution should be to constantly increase the awareness of their mortgage program to their member base. But unlike resolutions such as joining a gym and working out several times a week, increasing the awareness of your mortgage program must be a year-round endeavor. Of the credit unions that offer mortgages, only 4.5 percent of their members have a mortgage that is booked in the portfolio. The question is how can credit unions constantly reinforce the concept that they not only offer mortgages, but also feature competitive rates and unique products?
Build a Referral Network
One option to escape the two percent market share abyss is for credit unions to consider focusing on building a referral network that includes realtors, mortgage brokers and even construction companies. The National Association of Realtors states that 70 percent of homebuyers receive recommendations from realtors on mortgage financing, and 76 percent of those buyers take the advice. Without an active referral network, credit unions may be missing a big opportunity.
Here are three steps to build and maintain a referral network:
- Realize that a mortgage is a commodity. "Service is the differentiator," said David Stelter, real estate manager at First Resource Federal Credit Union ($448M in St. Joseph, MI). "Whether it’s helping a member or working closely with a realtor, providing hassle-free service will establish a relationship for future business prospects." Loan officers should be in communication with their network before, during, and after the deal.
- Present to local real estate associations . Many credit unions have hired established real estate loan officers who have industry knowledge and a book of business. Either they or the real estate manager should seek opportunities to speak at realtor lunch sessions or events and serve as a point of contact for the credit union. "Teaching real estate finance classes and giving presentations gets your name in the door, but the relationship with a realtor begins after the completion of the first deal," said Stelter.
- Grab realtor attention regarding new products. "Most realtors end up in a product and price niche that they are comfortable with," said Stelter. The key is determining which realtors to target given your credit union’s product mix and the various types of communities in your field of membership. If a credit union introduces a new mortgage product, it’s a great opportunity to network.
Red Rocks Federal Credit Union ($132M in Highlands Ranch, CO) recently introduced a two-year rolling, adjustable-rate mortgage first-time homebuyer program that caught the attention of realtors, according to CLO Steve VanSickler, as reported by the American Banker in November 2005. It is a great conversational starter that may generate new business.