By Ray Birch
LAS VEGAS—Credit unions may see even stronger mortgage lending in the years ahead, but for that to happen that must first “get out of their own way,” according to the president of the American Credit Union Mortgage Association.
Peter Benjamin told CUToday.info he sees an opportunity for credit unions to grab a bigger—and possibly even a record—share of the mortgage market due to their strong relationships that he predicts will gain value with consumers. But he also has a concern: the outdated mortgage lending policies and procedures at many credit unions.
Bejamin said his concerns center around credit unions relying too much on paper-based closing documents, cumbersome notary services and payment/cash being required at settlement.
“I believe we need to make a conscious effort to adopt and establish procedures and policies that will allow us to compete against other mortgage lenders that are only focused on a single line of business,” said Benjamin. “The perfect example of this would be the adoption of e-closing, regardless of whether it’s a hybrid model—with the majority of the documents signed electronically and a handful of documents being wet signed—or a full remote online notary closing (RON – all documents are electronically signed). They have become an essential component in how we do business with a forward-looking mindset. If the events of 2020 taught us anything: we need to be more agile and perhaps the requirement for a wet-signed settlement, on every transaction, is not necessary.
“Also, procedurally, we need to take a step toward improving the efficiencies throughout our processes,” continued Benjamin. “For example, if it’s custom to obtain two months’ worth of bank statements from a borrowing member and Fannie Mae and Freddie Mac allows this documentation to be done through electronic verification, why are we, as credit union mortgage lenders, still requiring a borrower to scan-print-download and mail their bank statements when it could be done automatically by us?”
Benjamin acknowledges that there may be some declines in the mortgage lending market in the short term due to various market factors, including rising rates, but he sees CUs getting a bigger piece of it.
“I fully believe the next three to five years are going to be the years of the credit union in mortgage lending,” said Benjamin. “I really think more people will gravitate to credit unions due to the relationships credit unions provide.
“Yes, mortgages have been flying out the door, but things are changing with rates rising and the market will cool a bit. Yet, what credit unions will get from the market will be much greater,” Benjamin continued.
Potential One-Third Decline
Benjamin forecast there could be as much as a one-third decline in overall mortgage lending volume from what lenders experienced in 2020 and 2021.
“I'm actually really intrigued to see where our market is at the end of the summer,” Benjamin said. “And the reason why I say that is the job market is still very stable, and I do believe that jobs buy homes. People still have the ability to buy homes.”
As they look to buy homes, Benjamin believes it is those strong relationships credit unions have combined with much improved lending technology that will drive the additional volume.
“I do know a lot of credit unions during the past year or two focused on their technology, with the goal of improving the member experience through their online platforms,” he said. “Now, when you look at the modern credit union, they're just as sophisticated from a technology standpoint as a non-bank lender or large bank.”
Another Advantage
Another advantage for credit unions, offered Benjamin, is the Biden Administration’s attention focus on affordable housing.
“The big topic now is equitable, affordable housing, and that's essentially what credit unions are founded on—community-based lending. If we stay focused on that and stay true to our mission of serving the communities, I fully believe the credit union mortgage lender is going to be the go-to expert over another lender,” he said.
More than ever, said Benjamin, CUs have a “fighting chance” to gain ground on the big banks’ mortgage lending share.
“We have a really good chance to increase that average 5% market share that we have as an industry,” Benjamin said. “I think the high-water mark for credit union mortgage lending market share was about 7.2%. “In the next three to five years if we stay focused on improving our technology making sure we stay true to our roots of community based lending, we’re going to see our share grow to possibly 15%.”
Benjamin added that the focus on home renovation in the last two years due to the pandemic keeping Americans at home more, and the lack of available homes to buy will likely keep a good number of people from shopping for a new home in the current market.
“However, in August I think we will start to see a small increase in inventory,” he said. “I think there's a lot at play when it comes to mortgages now. But I still think we're going to have a good year. I think the key to our success is really getting out of our own way. We have to start dumping off those old programs and guidelines that slow us down in order to be able to capture more business.”
Layoffs? Unlikely
The recent decline in mortgage lending that has led to some major banks, such as Chase and Wells Fargo, to announce personnel reductions in their mortgage lending teams. Benjamin does not believe credit unions will be making similar moves.
“During the hot market credit unions were not inclined to recruit, add staff and pay top dollar for mortgage lenders,” Benjamin explained. “Therefore, you will not see credit unions laying off staff like some big banks have. In the hot market that we saw in 2020 and 2021, these larger banks were offering really high dollar amounts to recruit top talent. Credit unions stayed true to form and did not raise commissions.”