WE’RE HEARING credit unions picked up a lot of market share following the global financial crisis and the subsequent refinance boom. The question is, can they maintain that progress now that refis have dried up and a greater percentage of the market is in purchase mortgages?
They’re confident they can.
Credit unions increased their share of the market to more than 7% last year from less than 3% in 2007, in large part due to the consumer backlash against big commercial banks. That share increase was facilitated by the fact that most of the business has been in refis, where borrowers deal directly with originators.
The acid test for credit unions would be whether they could maintain that share with a real estate agent sitting squarely in the middle. Many Realtors refer their homebuyer customers to lenders they have a good relationship with, but many credit unions historically have fallen outside that loop. Many real estate agents are skeptical that credit unions are reliable when it comes to closing loans on time, while others assume that borrowers must be a credit union member in order to get a loan from one.
But credit unions say those obstacles are largely a thing of the past.
“When we started in mortgage lending back in 1996, one of our primary goals being the new kid on the block was to woo the Realtors around here, and we found out rather quickly that’s a tough nut to crack,” says Randy Kegarise, vice president of lending at $300 million asset Charlotte Metro Federal Credit Union in North Carolina. Initially, real estate agents resisted using the credit union for the loan, even when the borrower insisted on it.
“But by the time the loan closes, in a lot of cases we have found that the Realtors give us compliment after compliment about the level of service we have given,” he says. “And in quite a few cases over the years we’ve had repeat business from those same Realtors. So what started out as just short of an adversarial relationship has really turned out well, and we get a lot of referrals from those same Realtors.”
“The one thing that we have found, not only back then but going forward, is that credit unions excel in service,” Kegarise says. “Credit unions offer more of a hands-on, hand-holding kind of process. That helps the borrowers and the whole process be a lot smoother.
“I think one of the things that has won over a lot of the realty firms around here is the fact that if their buyers are going through their credit union, they’re going to be taken care of. The frustration level with the whole process is going to be a lot lower than it normally would be. So rather than going out and telling realty groups how good we are at what we do, we show them. We have to be different, and if we can’t be different in terms of product offering or interest rate, it’s got to be service.”
“We do not have any challenges getting Realtors to take our business seriously,” agrees Gregory B. Meyer, community relations manager at Meriwest Credit Union in San Jose, Calif. “We have been able to compete quite well with other mortgage companies and banks doing purchase lending.”
“What it all boils down to is relationships and reputation,” he says. “If you have a good reputation for making loan processing quick and painless for your borrowers and Realtors, you will build the relationships you need to succeed as a purchase lender.”
But Meyer notes that credit unions can’t establish trust and confidence as reliable lenders with Realtors overnight.
“It can be a challenge for any new credit union getting into this business to be taken seriously. This is particularly true if they have not had purchase experience,” he says. “But with a well trained and experienced team, any credit union can compete with the banks and other Main Street mortgage lenders.”
Bruce Ailion, a real estate agent with Re/Max Greater Atlanta who does his personal banking at a credit union, says “credit unions would dramatically increase their success by simply showing up as interested in the mortgage sale.”
“I always tell people to consider their credit union when seeking a loan,” he says. “I love my credit union and if they expressed an interest I would send them business.” He also notes that credit unions in Georgia are exempt from a $3 per $1,000 state loan intangibles tax, which would save a borrower $900 on a $300,000 loan, thus giving credit unions a pricing advantage.
Credit unions must also market themselves aggressively to establish name recognition in their community. Nobody knows that better than Kegarise, whose office window looks out at Bank of America’s headquarters building and a Wells Fargo office.
“I think part of the reason we have grown is that we’re more of a presence in the community,” he says. “We do all kinds of marketing, we do television commercials, radio, billboards. Most of the folks in this area know who Charlotte Metro is. I think that’s a major contributor to the lack of pushback from Realtors. We’re a viable contender in this market.”
Indeed, most of the loan applications the credit union gets are from non-members who apply through its website. Charlotte Metro doesn’t require membership to begin the application process, although at some point prior to closing borrowers must join provided they’re eligible, meaning they live, work, worship or study in Mecklenburg County.
“Realtors can and do refer non-members to the credit union as long as they’re eligible for membership,” Kegarise says. “We’ve opened up our website so that non-members can apply. We’ve made great strides in opening that up so that just about anybody can join us.”
George Yacik has been covering the residential mortgage business for more than 20 years and writes frequently for industry publications. He can be reached at firstname.lastname@example.org.