Although today’s lending market is tough, credit unions that invest in the right tools can increase the likelihood of success.
With competitive rates and minimal fees, credit unions have always been a great option for consumers looking for home financing. But as the housing market shifts gears and lenders of all stripes now focus on controlling costs, many credit unions are struggling as much as any other lender to meet their margins.
Of course, some credit unions have done well by leaning into other types of home financing, such as home equity loans and home equity lines of credit. Others, however, are running into production roadblocks, and their technology is one of the biggest reasons why.
The reality is that many credit unions are still using older, inflexible loan origination systems that are not only ill-equipped to meet the needs of today’s consumers but make lending more costly as well. Yet when it comes to technology, more options are available today than many executives realize, and some are easy to implement and reduce costs significantly.
In fact, when it comes to technology, credit unions are finding out that the return on investment includes a return on value for their members.
There’s Life in the Cloud
Because truly end-to-end mortgage technologies are rare, most mortgage lenders, including credit unions, rely on a hodgepodge of software to originate loans. The trouble is that most popular software is often difficult to integrate with a credit union’s other software and systems. Even when integrations are possible, they typically take significant time and effort to complete and create additional workarounds that eat into costs.
In recent years, though—thanks to the advent of cloud-based technology and application programming interfaces, or APIs—a new breed of flexible, highly scalable, cloud-based mortgage technology has emerged that is changing this picture. Equipped with cloud-hosted services like AWS, these new loan platforms enable credit unions to break free from their production restraints and launch new loan products in just weeks instead of months.
This is exactly what Digital Federal Credit Union, the largest credit union in New England with about $10 billion in assets, did last year. Previously, DCU was using loan origination and point-of-sale software that was poorly integrated with its other mortgage-related systems. In addition to producing extra work, both products had created an erratic and subpar borrowing experience for its members.
After DCU implemented a new, more flexible digital loan platform built and delivered through the cloud with modern technology, things quickly turned around. In addition to letting members apply for loans online, the new platform helped DCU automate more than 70 mortgage processes, ultimately leading to an 85% increase in loan productivity.
More importantly, the platform is completely configurable to how any lender does business. This enabled DCU to launch new loan products that were more applicable to today’s market, including home equity loans and HELOCs.
DCU’s new platform now serves as the hub of its mortgage ecosystem and has become the driving force behind the credit union’s digital transformation efforts. DCU’s loan officers are much happier too since they now have technology that helps process and close loans faster without requiring extra work—and it increases member satisfaction.
It’s All About Value
While credit unions offer great rates and low fees, these advantages don’t mean a lot if a credit union fails to provide personalized service to its members. And the ability to do so will likely grow more challenging in the year ahead.
The Mortgage Bankers Association is currently predicting a 14% drop in total mortgage originations this year as higher rates keep many would-be buyers on the housing sidelines. With the entire mortgage industry in cost-cutting mode, the market for talented loan officers, underwriters and processors has grown more competitive in recent months as well.
It also bears mentioning that today’s mortgage consumers crave speed and convenience. If their credit unions can’t deliver, they will find competitive mortgage lenders with lower rates and better service. To continue providing value to members amid these challenges, every credit union owes it to itself to invest in the type of technology that keeps costs down and makes every interaction with members as frictionless as possible.
Although today’s market is tough, credit unions that invest in the right technology can still achieve success. By modernizing their lending processes and using newer cloud-based technology, any credit union can improve its loan production processes and create the type of experience that keeps members coming back for all their other financial needs.
Albert Einstein once said, “the true sign of intelligence is not knowledge but imagination.” In today’s tough market, most credit unions will need to think hard about the products and processes they need to excel. And once that vision crystalizes, the next step can be finding the technology to make that vision a reality.
Joey McDuffee is VP/sales and marketing for Blue Sage Solutions. McDuffee has been dedicated to development, support and sales of mortgage origination technologies for more than 25 years. His successful sales, implementation and problem-solving skills blend a combination of business knowledge and technical acumen to provide the most ideal approach to issues facing lenders every day. McDuffee has worked with a variety of the largest banks and mortgage companies across the country, including Wells Fargo, Citicorp, and JP Morgan Chase, designing and implementing mortgage origination technology solutions and assisting with transformational process re-engineering. Before leading sales at Blue Sage Solutions, he worked in the U.S. and abroad as head of sales at Wipro Gallagher Solutions, and holding numerous management, technical services and training roles while providing product design, technical support, project management and implementation expertise.