Three ways credit unions can boost mortgage market share

The member dynamic sets credit unions uniquely apart from other financial institutions.

While competing financial institutions chase transactions, credit unions build long-term relationships with their members. And they’re good at it, consistently earning higher customer satisfaction ratings than banks and other lenders. This gives them a unique competitive marketplace advantage, which they can leverage to meet all of their members’ needs.

However, while credit unions excel at making and servicing a variety of loans, including auto and consumer loans, they haven’t achieved the same level of success in the home finance marketplace.

According to the Credit Union National Association, that may be changing. While credit unions only originated 1.9% of the nation’s mortgage loans in 2007, credit union share of home finance increased to 8.7% by mid-year 2018, according to the Mortgage Bankers Association. Experts at CUNA expect credit unions to continue to outperform in the mortgage arena.

And that’s good news both for credit unions that want to deepen member relationships and for members who want to maximize their credit union relationship.

Although some are concerned that reaching mortgage borrowers will require credit unions to invest heavily in marketing, the truth is that many potential borrowers can be found within their existing membership base.

Unfortunately, a significant amount of member business is going to competing mortgage originators each year. However, credit unions can position themselves to win that business back.

Let’s take a closer look at three ways credit unions can set themselves apart and win more mortgage business.

Be tech-savvy

According to customer experience experts at J.D. Power, home mortgage customers want technology that makes the process faster and easier. Self-service is okay up to a point, but the data shows that home loan customers still want someone they can talk to.

Most discerning to borrowers is the lack of communication from lenders regarding the status of their loans. Applying the right technology can solve this problem. Lenders who incorporate mortgage loan lead management with point of sale and fulfillment are significantly more successful.

The Mortgage Bankers Association has predicted that purchase money mortgage loan originations will increase to $1.89 trillion in 2019, up from $1.64 trillion in 2018. This represents a fantastic opportunity for these institutions.

Be the trusted advisor

According to a study performed by Ernst & Young, American consumers want to trust banks, with 60% agreeing that banks have an important role to play, but in reality consumers don’t have faith in banks. When asked, consumers said they have lower levels of trust in traditional banks to fulfill strategic pledges, including providing unbiased advice.

Further, E&Y found that new market entrants, like fintech firms, have achieved parity with traditional banks when it comes to trust. Even though traditional banks have had the opportunity to be trusted advisers to their customers for decades, disrupter companies that have entered the financial services market within just the last few years are already trusted as much.

This is the credit union’s first and best opportunity to stand out from competing institutions.

Borrowers are looking for someone to trust. Credit unions are already that trusted source for auto loans. They can — and should — also play that role for home financing.

Be the customer service experts

One area in which credit unions have a competitive strength over other lender types is customer service. Lenders have been struggling to improve the borrower experience for more than a decade now and are gaining some ground. This is largely due to the application of new technologies that allow borrowers to perform research, get prequalified quickly and easily, and submit information electronically.

At one point, it was common industry knowledge that the mortgage industry ranked below the Department of Motor Vehicles in terms of customer satisfaction.

Fortunately, financial services has improved when it comes to serving their customers. J. D. Power now put the industry’s average customer satisfaction rating at 836 out of 1,000, according to its 2018 survey.

The problem is that “consumer expectations across the digital frontier have expanded markedly,” according to Jim Miller, vice president of the banking and credit card practice for J.D. Power. As customer expectations change, the quick technology fixes that have worked in the past aren’t delivering the desired results. That’s because deploying technology is only part of the digital mortgage process.

“We see that these digital centric banking customers have lower levels of engagement because they feel they haven’t received communication that’s tailored and is relevant to their needs,” Miller wrote in his blog. “As a result a few things happen. We see lower customer satisfaction rates, we see a lower likelihood to repurchase from the bank and a lower propensity to recommend their bank to colleagues and friends and family members. Finally, and perhaps most tragically, we do see higher likelihoods of attrition.”

It gets murkier when we look deeper into the mortgage transaction. Most lenders consider the mortgage as a deal that only occurs every five to seven years, which is true for most consumers, so they don’t take the time to build long-term relationships with their customers. Again, credit unions have an advantage here, because they have built those relationships through unrivaled member service.

Traditional mortgage lenders are struggling to meet borrower expectations while working to fend off new competitors. Meanwhile, credit unions already have good working relationships with 100 million American consumers. Even better, 72% of credit union members are satisfied with their institution, compared to only 60% for regional banks and 52% with national banks.

Bottom line, credit unions have a significant opportunity to increase market share in the communities in which they operate. Setting themselves apart by taking these steps will go a long way in positioning credit unions for long-term growth and success in the mortgage lending marketplace.