Purchasing a home is a long process that involves multiple stages, many players, and a lot of worry and indecision.
Historically, credit unions involved themselves in this process only as lenders; if they were ambitious and hoped to expand their mortgage programs, they sometimes formed partnerships with local real estate agents in hopes of getting referrals.
But the process has changed, thanks to technology. Prospective home buyers may idly surf for homes on the Internet for ages before actually committing to the process. They may happen upon the home they love before ever meeting an agent or talking to anyone in person at all.
Credit unions are positioned to help, but many are stuck in the old mentality of being mere lenders. That’s not a winning strategy anymore. It’s difficult to appeal to consumers by advertising the best rates and the fewest points. What consumers need is a savvy home-buying coach who will stick with them from start to finish.
On some level, credit union members understand this. Tandy Vincent, director of marketing at CU Realty Services, a Scottsdale, Ariz.-based real estate services credit union service organization, saw it with her own eyes when one of her company’s partner credit unions tried to market its implementation of CU Realty’s HomeAdvantage program, a cloud-based, software-as-a-service that gives members direct access to research the market and search for homes online.
“Los Angeles Police Federal Credit Union did an email that said, ‘Save thousands with LAPFCU’s new HomeAdvantage program,’” she recalls. “We expected about 125 to 150 registrations, but they only got about 20. So I said, ‘You know, people are jaded about rates and dollars. You’re a financial institution, and they expect you to save them money, so when you tell them you’re going to save them money, they’re going to ignore you. Let’s change the subject line and make it about the home-buying experience instead.”
The $841 million CU (Los Angeles) sent out a new email with the subject line “Start your home search with LAPFCU’s HomeAdvantage program,” and within three days, about 80 more members registered. It just goes to show, Vincent says, that members want a real estate advisor, not just a loan advisor.
“You have to think outside the box if you want to close more loans,” Vincent says. “They don’t shop around, they don’t rate shop, they don’t understand rates. They want to know that somebody’s an advocate for them and can help them through the process. You’ll get way more attention that way.”
Offering this kind of holistic attention can be expensive, says Jeff Vossen, SVP/mortgage originations and operations at TruHome Solutions, LLC, a mortgage company based in Lenexa, Kan. The holistic approach often involves multiple systems. For example, such email marketing systems as Constant Contact or lead management systems like Velocify LeadManager. For smaller institutions, working with a CUSO can often improve affordability because CUSOs can buy software in bulk and create their own credit-union-ready solutions to share.
“We’ve developed technology on credit unions’ behalf so that they can cultivate their membership to penetrate it as much as they possibly can from a mortgage lending perspective,” Vossen says. “If they were to do this all on their own, it would be … well, for the volume that they bring in on a monthly basis, they wouldn’t be able to afford it. It wouldn’t be cost-effective.”
Step 1: Exploring
In the past, says Vincent, credit unions would engage with buyers only in the few months before they were ready to buy a home, when they needed to get prequalified. But CUs can close a lot more mortgages by seeking out connections much earlier. Real estate agents aren’t the gatekeepers anymore; the real gatekeepers are the purveyors of online home listings. Responding to this, CU Realty’s HomeAdvantage solution gives credit unions a platform through which to offer online home listings—sort of a Zillow.com or Realtor.com for CUs.
“Credit unions were once reliant on real estate agents to send them leads,” she says. “But more than half of all home buyers start looking for a home online first. So if credit unions put themselves in that position (of offering a portal to the multiple listing service), they can become better advocates for their members. They are helping them find a home, they’re helping them find an agent, they’re helping them get educated, they’re helping them do the research they need to do. And then, ultimately, if they’re there through those steps, then they’re also there when [members are] ready to talk about financing.”
If the CU is engaged with potential buyers from the earliest moments of home-buying ideation, they’re ideally positioned to become the lender later on. Vincent says multiple studies show that home buyers don’t shop for mortgage rates. Most of them use the first lender they go to, or one that was recommended to them. They don’t understand the terminology or the calculations, and they don’t believe there’s much variation from one lender to another; so their tendency is to stick with a source that feels comfortable.
This is a strategy that should feel comfortable for CUs. Vincent says they’re not being asked to market aggressively to members in order to close more loans. Instead, they’re positioning themselves as member advocates in the real estate market, so that wherever members are in the home buying cycle, the credit union can help.
“We encourage them to do that by offering access to online listings, offering referrals to agents, offering educational seminars,” Vincent says. “Some of our partners do webinars. Some of them have agents write blog articles, articles for their newsletters, articles for social media. It really is a full-court press from a marketing perspective: How do we position ourselves so that we help them make smart home-buying decisions, not just get a loan?”
Step 2: Seriously Looking
Often, potential buyers don’t bother selecting a real estate agent until they’ve found a property they’re interested in. That might be fine from the member’s point of view, but it’s a disaster for a credit union that hopes to get their mortgage business.
Vincent explains why: “Let’s say Jane Smith goes to her credit union and gets pre-approved for the home of her dreams, and then she turns to a real estate agent who is going to help her find the home,” she says. “But that real estate agent has a preferred lender that’s not the CU, so the agent says, ‘I know you’re pre-approved already, but I know and trust this great mortgage company. Let’s go get you pre-approved there.’ Then they go off with this other company.”
What credit unions need, Vincent says, is a great nurturing system—a way to stay front of mind with preapproved members while they’re looking at houses so the credit unions don’t lose out on business. Technology—customer relationship management software in particular—provides the hand-holding that’s required.
Vincent has noted the growing popularity of a lead-nurturing system called Intuvo within the credit union movement.
“A lot of times, people will come and get pre-approved and prequalified, but they may not turn around very quickly,” she says. “Maybe the inventory is low, maybe they just can’t find the home that they want. There are varying reasons why it might take a super long time, or that the loan might fall out altogether. The Intuvo CRM system helps [credit unions] nurture those leads along and increase their pull-through rate (the number of applications closed per applications made).”
Vossen says TruHome uses Constant Contact to forge a link between agent, member, and lender. “If we obtain Realtor® information, which we try to do right at the outset if somebody’s working with a Realtor, we get that information into the system immediately so that we can put them in the rotation of this communication process, to give them status updates,” he says. “If they’re not working with a Realtor, we have a referral process. If they’re in, say, Dallas, Texas, we have a referral partner that will set them up with an agent there. Then, if that loan actually moves forward, if someone makes an offer on a house, that loan will stay with us.”
If people are so reliant on recommendations when finding an agent, why don’t they just use the agents they and their family have used in the past?
“As much as we want to believe that people have great experiences with the agents they’ve used in the past, they don’t reuse them,” Vincent explains. “They move to a new neighborhood, and they want people with special expertise in that area. They don’t generally call on the agent a second time. So when credit unions create a network of preferred agents that they can refer their members to, it’s actually a big value-add.
“They’re hoping, of course, that if they share leads with agents, then agents will then share leads back with them. But it’s also a huge benefit [to the member] to say, ‘If you already trust us with your money, trust us also to give you a referral to an agent that we know is reputable and experienced in your local market.”
Step 3: Applying
If the credit union manages to get a member to apply for a mortgage, the work isn’t done yet. Depending on their demographic and their personalities, members may want to engage with the CU in different ways. Some will want to talk to loan specialists in person and mail or fax the needed documents. But others, especially millennials, will expect to be able to do it all online.
Christiann Jakresky, director of financial services operations at Lending Solutions, Inc., an Elgin, Ill.-company that provides 24-hour contact centers for lending operations and offers a broad portfolio of lending products, says that’s where her company comes in. Its call centers can manage applications on the phone 24 hours a day, and it also offers online application software.
“One of the more popular ones is Accenture,” she says. “Also, there’s MortgageBot. From a borrower’s perspective, both are a very comprehensive application process, and they will give them a decision in most instances. Oftentimes the credit unions turn off the automatic decision because, if it’s a denial, they want to be able to look at it and see if they can do anything to get it approved. But if someone is a really solid approval, they could conceivably get the approval only a couple of minutes after they submit.”
Jakresky says some of these systems will generate automatic disclosures that members can print out or save. Other systems can come into play in managing the slew of documents that have to be exchanged.
“At this point, the credit union is going to review the loans and request supporting documentation from that buyer if they’re approved,” she says. “Pay stubs, W-2s, Social Security statements, tax returns, things of that nature. Many moons ago, these would be sent in either via mail or fax. Nowadays, a lot of people will set up secure emails or allow members to upload the documents right into the application system. The system can then alert the credit union that they have these documents from the borrower, and they can start reviewing them accordingly.”
Even such third-party documents as home appraisals can be delivered to the borrower electronically, through an email or portal. It saves postage and time—which is good, because the next process involves plenty of thumb twiddling.
Step 4: Waiting
“Once all the supporting documentation is in, from a borrower perspective, they do a little bit of sitting and waiting,” says Jakresky, “waiting for that file to be underwritten, waiting for the appraisal piece, the title. But now credit unions are leveraging systems to be able to auto-send emails so they can give members information on what the current status is.”
The waiting period is a “pain point” for borrowers, she says, even if it’s just a refinancing. They’re nervous, and they can feel abandoned if the credit union doesn’t make a point of reaching out every time there’s news. Luckily, this is easily remedied by simply keeping them in the loop. The member should receive a new notification for every piece of the puzzle that falls into place. And then they should be informed promptly when the wait is over.
“Typically, the loan officer will reach out and let them know that they’ve been approved and if there’s any additional information that they may need,” says Jakresky. “Sometimes that’s a phone call, sometimes it’s email, sometimes it’s through the application system or communication portal.”
Vossen says TruHome Solutions hopes to offer a social-media-based communication system in 2017. Millennials are most comfortable in that environment, he says, and it’s a great way to keep everyone on the same page.
“During that incubation stage, if you will, whoever’s involved in the transaction will be looped in,” he explains. “It’s very similar to Facebook. If you’re friending somebody, you’re going to get all their updates on your news feed. Well, if you are in a mortgage transaction, you can bring in all the parties who are relevant: the Realtors, the borrower, the lender, the title agent, that sort of thing. Then you have communication streams and everybody’s updated throughout the process.”
Step 5: Closing
Closing is the end game of any mortgage transaction, and it’s a tense time. In the past, buyers, sellers, or title companies sometimes tried to jam through a rush closing, but new buyer-protection regulations (which require the closing disclosure to be in place three to seven days ahead of time) have cramped their style. On the other hand, technology has smoothed the process of actually delivering the documents.
“The closing oftentimes happens at either an attorney’s or a title company or an escrow company, depending on what state you’re in,” Jakresky says. “You have to send the closing disclosure to them so they can review that and have time to analyze it. It gives all of the breakdowns, all the different fees and how much money you have to bring to closing, all those different variables.”
Lenders used to provide that information a day or two before closing, or even the same day. But now, to try to make up for the several-day delay, they often provide it digitally instead of by mail or courier.
“That electronic piece is really helpful whenever possible, because that takes away some of the extra time, and it allows you to document that you provided the stuff,” Jakresky says.
The new regulation is beneficial to consumers, but sometimes it doesn’t feel that way from the perspective of buyers who are harried and worried. Using technology to smooth the road is just one more way for CUs to show members that their financial institution has their back.
Jamie Swedberg is a freelance writer based in Georgia.