Here’s how to take advantage of low mortgage rates.
Mortgage rates reached record lows due to the COVID-19 pandemic. With interest at a bargain, homeowners are looking to refinance. Refinances accounted for about 65% of all mortgage applications in August, according to the Mortgage Bankers Association Weekly Applications Survey.
Why are consumers interested in refinancing right now? Homeowners across the nation’s 50 largest cities could save an average of nearly $23,000 over the life of their loan by refinancing. During the first quarter of 2020, borrowers who refinanced their first lien mortgage in the first quarter of 2020 lowered their rate by an average of 0.75 percentage points, according to Freddie Mac.
The reason why a homeowner should refinance is clear. Your challenge is to get them to choose your credit union over a traditional bank. The COVID-19 pandemic has created an unprecedented opportunity to attract new customers. Here’s how to capitalize on low rates.
1. Use It to Attract New Members
According to the mortgage data analytics company Black Knight, almost 13 million borrowers could save money by refinancing, creating a record number of potential customers. Many banks are experiencing a backlog of applications with a waiting period of as much as 120 days. To address the overwhelm, banks like Wells Fargo, U.S. Bank and JP Morgan Chase are tightening requirements, which means fewer applicants will qualify.
Credit unions are known for offering individualized service and, by providing a great mortgage refinance experience, you have the opportunity to attract new customers. Make sure you share your membership requirements, especially if they have changed since your credit union was first started.
“Over the last 20 years, many credit unions have made it easier to join,” says Ken Tumin, founder of DepositAccounts. “They’re no longer solely employer- or industry-based membership, which means more people can qualify. A lot of customers might not realize that.”
2. Capitalize on the Community Aspect
Credit unions generally take a more personal approach when it comes to loan approval, treating applicants like members of a community instead of numbers. As a result, they’re often a good option for people who may have lower credit scores. This approach can provide an opportunity to develop a long-term relationship with local residents.
Credit unions are often committed to being a positive force in the community, as they usually are located in a specific state or region instead of being a national entity. Members often appreciate being part of a financial institution that focuses on people instead of profits.
3. Practice Proactive Selling
If you’ve cut employees’ hours, use the opportunity to bring them back by having them reach out to current members who may not be aware of the opportunity to refinance their mortgages. Employees can feel good knowing they’re making an impact in the lives of customers by helping them save money.
Start by having them contact current mortgage customers with interest higher than 4% that might benefit from refinancing the loan. Then reach out to deposit account customers to discuss mortgages they may have with other financial institutions that could be eligible for refinancing. Once a lead is established, your employee could refer the customer to your mortgage experts.
4. Work with Members Face-to-Face (or Mask-to-Mask) if There Are Any Issues
A mortgage through a big bank may mean customers don’t have a direct line to their broker or servicer. Credit unions, however, can offer and promote solid customer service. Use the opportunity to demonstrate how your personalized assistance is different from other financial institutions. Have lenders reach out and explain the process.
Since credit unions are not-for-profit and don’t need to make decisions based on stakeholder interest, you can also take time to educate your members on money matters, helping them grow balances instead of paying fees. Hold free workshops that help them learn about financial planning. And start with a session on the pros and cons of refinancing.
5. Revamp Your Website or Marketing Materials to Put Refinancing Front and Center
“A lot of people might be familiar with the deposit products credit unions have to offer, such as checking and savings accounts,” Tumin says. “But many have expanded their credit offerings over the last 20 years, and some consumers may not be aware they could refinance their mortgage at a credit union instead of with a traditional bank or online mortgage lender.”
Make sure you put your rates and advantages front and center with signage, website banners and marketing materials. Create an online promotion strategy that educates members who may visit your website for another reason, such as to log into online banking. And while your branch may have limited hours due to the pandemic, display signs inside your location as well as banners near the street or your ATM to advertise mortgage refinance opportunities.
6. Build (or Rebuild) Community Relationships to Attract Members
Look for opportunities to partner with lead generators that could send members your way and work to build those community relationships.
For example, reach out to realtors who may have past clients interested in refinancing. Or contact home improvement contractors who may have customers that want to refinance their mortgage in order to pull out equity for renovation projects. If their jobs are being delayed while they wait for banks to complete the funding process, they’d probably be interested to learn about other opportunities that might speed up the process.
Then take opportunities to make the relationship mutually beneficial by referring your customers to businesses that could help them achieve their goals.
Credit unions have a chance to demonstrate their strengths during the economic crisis. By being focused on solutions and service, you can help members and potential members make the most of their biggest investment—their homes—by helping them save money on their mortgages. Since consumers may already be shopping around for the best rates, take this as an opportunity to let your benefits and community values shine.
Stephanie Vozza is an experienced writer who specializes in business and finance. Her clients include LendingTree.