By Ray Birch
BROOKFIELD, Wis.—It won’t be long before operating a mortgage operation may be as simple as running the CU’s credit card business.
That’s what one mortgage experts is predicting, saying the growing complexity of running a mortgage business brought on by growing compliance demands and the
need for skilled people will lead to vendors offering high-producing turnkey mortgage lending services.
Lionel Urban, VP of product management for bank solutions at Fiserv, told CUToday.info that in the not-too-distant future lenders will be able to get in and out of the mortgage business with a “flip of a switch.”
“Mortgage fulfillment services providers, both onshore and offshore, are starting to do business by transaction,” said Urban, who co-authored a Fiserv study titled 2019 Trends: What’s Next in the Mortgage Market. “So you could someday sign up for a mortgage service that includes the fulfillment or people piece.”
Urban compared what is likely coming down the road for the mortgage business to what occurred earlier in another channel.
“I use the credit card analogy,” he explained. “Years ago if someone wanted to offer a bank card, they had to find the clients, they had to issue the cards, service the cards, create all the terms … That would mean prohibitive costs today for most institutions. But then Visa and Mastercard came along and said ‘Give us your rates, fees and terms and we will take care of everything.’ I think the mortgage industry is heading there. So for institutions that just don’t have the scale—and I am talking about the necessary technology and staffing—this will be as big benefit. You will pay the vendor by the transaction each time a loan closes.”
Becoming Too Complex
Urban believes the mortgage business is simply getting too complex for many financial institutions to run a mortgage department efficiently.
“Whereas, if you just sign up for a service that makes good loans and you just submit your rates, fees and terms, then the process of making the mortgage loan becomes a no-brainer,” said Urban. “And the credit union can then pay more attention to the bigger-picture mortgage issues, such as the balance sheet and the member experience, as opposed to doing all the blocking and tackling that comes with running a mortgage department.”
Until that day comes, Urban said a key in 2019, as competition for mortgage business increases as the number of borrowers wanes, is for credit unions to become
Lionel Urban
much more efficient with their mortgage lending operations.
“Mortgage lenders are consequently challenged to deliver a more efficient lending process and a compelling experience,” said Urban.
Rethinking Costs
Urban pointed to national research that indicates the average cost to make a mortgage loan is $8,900.
“If it costs $8,900 to make a loan, and say I am spending $300 on technology costs per loan, that means $8,600 in other costs to manufacture a loan,” said Urban, who stressed that greater spend on technology to reduce other mortgage operational costs is a good idea. “OK, so I now spend $500 on technology per loan as compared to $300. But that extra $200 drives down my other operational costs by 25% to 50% so that extra tech investment is a no-brainer.”
Urban believes many more credit unions in 2019 will spend more on technology to support mortgage operations.
But money should also be spent to ensure a better experience for borrowers—an experience that is seamless and fast throughout every aspect of application and closing.
“Let’s say you have a really great app, but the borrower can’t get the loan conditions easily–it’s not easy to follow up on rate or do something else along the way. That creates frustration and many will abandon the process,” he said. “And, as we all know, consumers are comparing their credit union online experience with their last great online experience they had with another retailer—which could well be Amazon. So the member is thinking, ‘Why can’t my credit union experience be the same?’”
Grabbing Staff, Grabbing Share
Urban also believes 2019 will be the year credit unions expand their mortgage market share by picking up talented staff from banks.
“Experienced staff originate more loans and can put in more mature processes that work well,” said Urban. “But they are typically paid for performance—and paid a lot when the mortgage market is hot. But now that the mortgage market is slowing down, banks are laying off skilled people credit unions can now afford to hire since their salary demands will be lower. Credit unions can bring on a lot of good people who can bring more production, good processes and knowledge to the mortgage lending department. Plus, these people can help solve some of the complexities brought on by the growing compliance demands.”