ACUMA Summer 2016 Pipeline by ACUMA

SUMMER â&#x20AC;¢ 2016

ACUMA

g in at br le Ce

PIPELINE

MAGAZINE

s ar Ye

Mortgage Loan Leakage By Tom Burton n Page 26

INSIDE Understanding Generational Perspective n Page 49 The Look of Mortgage Banking in 2020 n Page 40 Top 300 Mortgage-Granting Credit Unions n Page 55 20th Anniversary Conference Information n Page 19

SUPER STAR

SUPER COMPETITIVE

SUPER EASY

SUPER PRECISE

SUPER FAST

ABOUT ACUMA ACUMA

PIPELINE MAGAZINE

ACUMA Pipeline is a publication of the American Credit Union Mortgage Association, PO Box 400955, Las Vegas, NV 89140.

Mark Wilburn Truity Credit Union Chairman

Pam Davis

Delta Community CU Vice Chairman

Barry Stricklin Tower FCU Treasurer

Tim Mislansky

Wright-Patt Credit Union Secretary

John Reed

Maine Savings FCU Director

Who We Are

CUMA is an organization of and for credit unions, dedicated to the simple principle that credit unions have both an obligation and a competitive need to become a “premier provider of home loans for their membership.”

Michael Patterson,

ACUMA brings together the shared real estate lending and financing interests of thousands of credit unions and CUSOs.

Bob McKay

ACUMA member organizations include federal- and state-chartered credit unions and CUSOs, mortgage insurance companies, secondary market investors and investments banking firms, and technology companies operating in the field of mortgage banking.

Financial Partners Credit Union Director

Anheuser-Busch ECU Director

Amy Moser

Mountain America Credit Union Director

Anita Domondon Meriwest Mortgage Director

ACUMA

Bob Dorsa

President (877) 442-2862 bob.dorsa@acuma.org Learn more at acuma.org The information and opinions presented here should not be construed as a recommendation for any course of action regarding financial, legal or accounting matters by ACUMA, The ACUMA Pipeline or its authors. © Copyright 2016 by ACUMA. All rights reserved. Printed in the USA

Our Core Values

We are a non-profit trade association committed to promoting credit union mortgage lending proactively, positively, but not politically.

2 Our members are our owners and are treated as such.

3 We are committed to helping

Experience the Difference

the Realtor community understand credit unions and the value they bring to promoting home ownership.

4 We maintain a high level of fiscal responsibility while ensuring that membership provides access to all employees of the credit union or CUSO and that events are high quality yet affordable.

5 We provide exceptional education and networking using experts from the mortgage banking, leadership and credit union communities.

Summer 2016 - PIPELINE 1

CELEBRATING 20 YEARS

President’s Column

As Our Anniversary Approaches, Celebrating 20 Years of ACUMA By Bob Dorsa

1996 ... it was a very good year: n Credit Unions were preparing for their next logical step to becoming more viable for their members when it comes to housing finance. n Bill Clinton was serving his second term as president. n The Dallas Cowboys beat the Pittsburgh Steelers 27-17 to win the Super Bowl. n Muhammed Ali lit the Olympic Flame to open the Summer Games in Atlanta. n The Yankees beat the Braves in the World Series. While all of this was happening, ACUMA was born ... In 1996 Bill Walker was leading the Southern California CUREN and invited me to attend a meeting to discuss an expansion of the organization. The initial discussion was about creating a national mortgage CUSO, but based on my experience with CUSOS I was not sure it was the right time. I suggested to Bill and the CUREN the formation of a nonprofit trade group that would be similar to NACUSO, a nonprofit trade group for CUSOs that I was managing at that time. That conversation got the ball rolling. NACUSO initially became the official managing entity for ACUMA, which elected its own Board of Directors. Later that year, about the time the Yankees-Braves World Series was taking place, the first official ACUMA event was held in Seattle. Total attendance was 28. ACUMA was off and running. The next ACUMA event took place in June 1997 in Washington, D.C., just a few blocks from where ACUMA will gather this September for our 20th anniversary conference.

2 PIPELINE - Summer 2016

ACUMA CHANGES WITH THE TIMES

The world has changed a lot in those 20 years. And ACUMA has changed with it. One especially monumental event was the horrific 9/11 attack in 2001; I still recall in vivid detail the anguish that event brought to our nation and the impact it continues to have on the way we live. I also remember agonizing over whether to go ahead that year with ACUMA’s fall conference, which had been planned for mid-October, only about a month after the tragedy. We went ahead with the event, which I still believe was the right thing to do, and people who registered decided to come—to get on with their lives and their businesses, hoping for better days ahead. Then, in 2005, the ACUMA Board decided it was time to strike out on its own, making the decision to end its relationship with NACUSO. I had a decision to make, too. Since I have been involved with credit union mortgage

lending for 30 years, I decided to join ACUMA full time. And I’ve been here ever since, having the time of my life. It was an especially good time in the mortgage industry—or so we thought. We were almost giddy as home prices began to soar in the early part of the 21st century. Many ACUMA members started to think, “Wow, we can be competitive in mortgage lending markets.” That part, at least, proved true, after the 2008 economic collapse shifted the way consumers viewed Wall Street and Big Banks. Still, it has taken the nation’s economy and the housing market in particular a good six or seven years to recover. Today we find a “new normal” for real estate with challenges and potential disruptions on the horizon. (Take Quicken loans, for example. How will credit unions answer the competitive challenge? )

A FIRST-CLASS TRADE ORGANIZATION

During ACUMA’s past 20 years, I could not have been more blessed to work with so many great people. We have many members who have been with us for 10- and 15-plus years to go along with those early adopters who joined in the late ‘90s. Their faces have become familiar at our workshops and conferences— they are our ambassadors, spreading the word about ACUMA’s value. Together with Tracy Ashfield, who has become more and more involved with ACUMA since her early engagement in 2000, and the dozens of credit union professionals who have served on the ACUMA Board, we take great pride in having a truly first-class trade association. Thanks to our members, new and old. We promise that the next 20 years will be more exciting that the first!

RETAIL

CORRESPONDENT

CALL CENTER

A PARTNERSHIP MODEL FOR YOUR CREDIT UNION’S

UNIQUE NEEDS! Discover the benefits of working with a Credit Union owned mortgage lender Partner with MFM and customize your Credit Union’s experience with a variety of partnership levels available. From a Call Center model, to a Retail model with a dedicated mortgage originator, to our Correspondent model for Credit Union’s with more experience in mortgage lending. Compete with the larger lending institutions with MFM’s aggressive pricing, offer your members the best mortgage products available, and create a mortgage lending niche for your Credit Union!

More options for your members. More opportunities for your Credit Union. MFM

www.memberfirstmortgage.com

1.866.898.1818

NMLS ID# 149532

THE IMPORTANCE OF ADVOCACY

A Message from the Board Part of Being a Mortgage-Lending Leader Is Telling Your Story By Pam Davis

can hardly believe summer is here and our annual ACUMA conference is just a few weeks away. During this year’s conference, we will be celebrating 20 years of serving America’s credit unions in the mortgage lending space. I suspect many of you have attended most of the conferences held over the last two decades. I have been an attendee since 1998. Wow! Those years have flown by as we worked tirelessly to bring together credit unions and other vital industry partners, including Realtors. A critical objective of our organization is to provide education, support and thought leadership on regulatory updates. Through networking and attending ACUMA sessions, which are always filled with timely regulatory updates, I feel that, as a whole, credit union mortgage leaders have been able to stay current and comply with all of the regulatory fastballs we have received. Just think about all the changes that have occurred in the past 20 years: technology and the need for immediate loan decisioning, appraisal guideline changes, SAFE Act, TRID, CFPB, HMDA, Flood … and the list goes on. Many of these changes have significantly impacted how we do business; they have also profoundly impacted our members’ experiences. I am also reminded of the mortgage trends that we didn’t adopt, such as Stated Income, Stated Asset, 100% LTV and No Verification Loans. Do you remember the pressure we felt to offer these loans? With the knowledge gained and tools provided at ACUMA conferences and workshops, we have all pursued the

4 PIPELINE - Summer 2016

same goal: to help our organizations be compliant with these various regulations and industry trends. We all diligently strive to comply with all of the “new” regulations, and I think we do a great job.

THE IMPORTANCE OF ADVOCACY

However, I feel that we are sometimes so engaged in complying and keeping our operations afloat that we do not look to the future. There is always the possibility that future regulatory changes may impact our members by making it more difficult–or expensive– to offer various products. We should consistently question whether we have focused so heavily on compliance that we have forgotten about advocacy. In its most basic element, advocacy can be defined as speaking or acting in support of an issue or cause. Are we “blindly” implementing regulations that may not be in the best interest of our industry, members and organizations? Am I making my voice, or that of my organization, heard when and where it counts? We need to be vocal and shape policy, not just react to and enforce it.

“We need to be vocal and shape policy, not just react to and enforce it.” Take a moment to ask: n Do I know my state-level lawmakers? n Have I contacted them about the credit union movement? n Does someone at my credit union track proposed rules and send commentary? There is no doubt regulation is necessary and serves consumer interest. We simply need to leverage our professional knowledge and experience to help policy makers craft legislation that achieves this goal. As the NCUA pushes to increase credit union membership in a proposed rule that should be ready this fall, which we all know is a positive approach, the question becomes: Is your credit union ready to engage? I encourage all credit union leaders to become more involved in credit union advocacy. After all, who is better to advocate for the credit union industry than those who know it best? That, of course, is you. Mortgage leaders have such a great story to tell. Make sure you are telling your story! Pam Davis serves as the vice chair for the ACUMA Board of Directors, which governs the organization. She is the Senior Vice President, Branch Delivery and Operations, for Delta Community Credit Union. The opinions expressed here are those of the author.

)+$ 9$ 86'$ ORDQV SURYLGH D JUHDW ZD\ IRU &UHGLW 8QLRQV WR JHW WKHLU PHPEHUV LQWR KRPHV /HW XV KHOS \RX KHOS \RXU PHPEHUV ZLWK WKHVH IOH[LEOH ORZ WR ]HUR GRZQ SD\PHQW SURGXFWV Contact Us at 877.912.8009 or Info@myCUmortgage.com

Â®

TABLE OF CONTENTS

1 Columns 1

Mortgage Loan Leakage

2 4 8

Page 26

9 11

About ACUMA Who we are, ACUMA Core Values President’s Column: By Bob Dorsa Topics of Interest to ACUMA Members and Mortgage Lenders A Message from the Board: By Pam Davis, Board Vice Chairman Comments about ACUMA’s Strategic Direction Compliance Challenges: By Kris Kully A Look at Pressing Issues Affecting Credit Unions Making a Difference: Honors, Awards and Recognitions for Individuals and Organizations Regulation and Legislation: By John J. McKechnie An In-Depth Look at Issues Affecting CUs at the Federal Level

64 The Last Word: by Tracy Ashfield

A Look at Big-Picture Issues Facing Credit Unions

12 In the Pipeline: Insights and Observations on CU Mortgage Lending 14 16 20 22 24

Page 30

SalesRecruiting Recruiting Sales 2020 2020

Hiring Right in the New World of Mortgage Origination By Patricia M. Sherlock

Too Little, Too Late, Too Many Issues – By Tim Mislansky CFPB Puts Consumer First – By Mark McElroy Crunched for Time? – Arch Mortgage Insurance Company Home Buyer Profiles: NAR Survey Shows a Changing Market Workshops Provide ‘Deep Dive’ into Topics

26 Mortgage Loan Leakage: Are You Optimizing Your Process to

By Tom Burton

The following article is a chapter from Mortgage Professional Handbook. It is reprinted with permission.

Page 40

Capture Business … Or Letting It Seep Away?

30 Filene Studies Loan Motivators: What Drives Credit Union Members

to Choose Loans from Their CU ... or Someone Else?

Mortgage Origination

40 Sales Recruiting 2020: Hiring Right in the New World of By Patricia M. Sherlock Generational Perspective

Page 49

49 Generational Perspective: A Key to Successful Recruiting and

Hiring, and a Collaborative Workforce By Tom Burton

55 The Top 300: Take Time to Savor Last Year’s Numbers Summer 2016 - PIPELINE 7

FAIR LENDING: ADDRESSING DISPARATE IMPACT

Compliance Challenges

Fair Lending: Addressing Disparate Impact By Kris Kully

he immense piles of additional data that the regulatory agencies will receive under the new HMDA rule will provide them (and even perhaps the public) with a quicker path to identifying a lender’s statistical fair lending disparities. A cynic might say that to find disparate impact in a set of data, all one has to do is look hard enough. Since by definition, disparate impact discrimination can arise even when a credit union treats all of its members equally, how can a credit union assess its risk of disparities and address that risk to fend off fair lending scrutiny down the road? Below, I highlight some areas that could expose a credit union to disparate impact risk.

PRICING DISPARITIES

There are many reasons that two similar members may get a loan with a different rate or fees. The regulatory agencies will examine a lender’s data to see whether any correlation exists between APR, rate, or fees; and race, ethnicity, or gender. To prevent pricing exceptions from resulting in disparate impact, credit unions should consider limiting loan officers’ pricing discretion; implement and follow objective criteria for granting pricing exceptions; and thoroughly document the reasons for all exceptions. Allowing loan officers to pick their compensation levels (and their corresponding rate sheets) also is a practice that should be monitored to see if the pricing correlates with protected characteristics.

8 PIPELINE - Summer 2016

NEW PRODUCTS

Credit unions are dedicated to serving their members’ mortgage needs, for instance, by developing special products to serve first-time homebuyers, or special criteria for members with limited English proficiency. While those efforts may seem benevolent, they could result in members of a particular ethnic or racial group getting loans with different features or costs. Credit unions should have and implement written policies for assessing the potential disparate impact risk of all new product offerings. They should ensure that they offer each member all the types of loans for which the member is likely to qualify. They also should analyze in advance all marketing efforts for new products to see whether the efforts target (or discourage) certain groups. Credit unions that use marketing vendors should also consider any predictive models those vendors use. While the models may predict response rates, they may not be consistent with fair lending obligations.

REDLINING

Redlining occurs when a lender is found to have denied or limited access to mortgage loans in a certain neighborhood based on its racial or ethnic com-

“Keeping lending and pricing policies as objective as possible, documenting exceptions, selfmonitoring, and taking quick corrective measures are important tools to address disparate impact risks.” position. While the targets of redlining enforcement actions have largely been banks with a duty under the Community Reinvestment Act to meet their communities’ credit needs, the fair lending enforcement agencies have indicated that they expect all lenders to serve minority neighborhoods in the lenders’ market areas, or at least to do so as well as their competitors. To determine whether redlining disparities exist, the agencies will look at where the lender locates its offices and loan officers, and where they focus their marketing efforts. HMDA data will be helpful in identifying dis-

FAIR LENDING: ADDRESSING DISPARATE IMPACT

parities in minority neighborhoods (e.g., applications approved/denied in the area; types, features, or pricing of loans; all perhaps tracked against each loan officer’s identification number). Credit unions may want to examine the geographic focus of their lending efforts and consider outreach to minority neighborhoods in their area.

SERVICING

The manner in which mortgage loans are serviced can also be a source of disparate impact scrutiny. Regulatory agencies will examine the policies and practices for offering loss mitigation options to members of different racial or ethnic groups, the speed with which loans are pursued into foreclosure, and the extent to which servicers offer add-on products like debt collection or suspension agreements.

“Disparate impact discrimination can arise even when a credit union treats all of its members equally.” Credit union servicers should examine their data on these efforts, establish and follow objective default servicing procedures, and clearly document all servicing decisions and exceptions. Periodic training on fair servicing is also an important way to reduce the risk of disparate impact.

Disparate impact can seem to lurk everywhere, but at the same time it can be hard to prevent. Keeping lending and pricing policies as objective as possible, documenting exceptions, self-monitoring, and taking quick corrective measures are important tools to address disparate impact risks. Kris Kully is a partner in Mayer Brown’s Washington, D.C. office. She concentrates her practice on federal and state regulatory compliance matters affecting providers of consumer financial products and services. Kully is a former lawyer for the Department of Housing and Urban Development. In that role, she provided legal counsel to the department on the mission oversight of Fannie Mae and Freddie Mac, the interpretation of the RESPA and the implementation of the department’s various housing assistance and community development programs.

MGIC In April 2016, more than 4,000 mortgage professionals trusted us with their professional development. Why? Because we are committed to ensuring our partners have equipped themselves for the road ahead. It’s a culture of service and fiscal responsibility that has allowed us to build and maintain strong relationships with our credit union partners, and it’s the reason that credit unions continue to trust us to provide responsible riskmanagement solutions that support affordable homeownership. WE ARE MGIC, AND WE’RE IN IT FOR THE LONG HAUL.

#MGICTraining

Summer 2016 - PIPELINE 9

MAKING A DIFFERENCE

Making a Difference Honors, Awards and Recognitions for Individuals and Organizations Helen Marrone, Director of Lending at Direct Federal Credit Union, received several awards at the recent Direct Federal Employee Recognition Celebration. Marrone earned the peervoted “Value in Practice: Drive” Award, which honors an employee for being “hard-working, energetic, and diligent in pursuit of individual team and organizational goals.” Morrone also won a Business Impact Award for her work and involvement with Needham, Massachusettsbased DFCU’s Online Loan Application initiative, as well as the Credit Union All-Star Team award, presented to individuals whose names were repeatedly nominated across multiple categories. l Stephanie Dombrowski, Mortgage Loan Officer at Ent Credit Union, has been named to Mortgage Professional America’s “2016 Elite Women” list. The mortgage industry publication annually spotlights 100 women nationwide who “are shaping and changing the face of Dombrowski the mortgage industry.” Dombrowski’s loan volume numbers have consistently earned her national recognition as a top producer. This spring, Scotsman Guide listed her at No. 256 on its “Top Dollar Volume” list and No. 85 for “Most Loans Closed.” Additionally, National Mortgage News ranked her at No. 87 in its “Top Producers” list for generating $85.8 million in loan volume for 2015. “Those numbers reflect a real passion for educating and helping our members, as well as having the support of a first rate mortgage loan processing

and servicing team,” said Tony Sloan, Production Manager Loan at Colorado Springs, Colorado-based Ent. l Tanita Richardson, Assistant Vice President of Real Estate Lending for Chevron Federal Credit Union, has been named a “Woman to Watch” by the Credit Unions Times. Richardson previously worked for Bank of America, Provident Funding, Countrywide and Washington Mutual. She joined Oakland, California-based ChevRichardson ron in 2006. She has worked in a variety of real-estate lending including sales, processing, underwriting and closing, secondary marketing, and credit risk and management. l Shirley Stange, Loan Officer at Ent Credit Union, has been listed in the 2016 Top Producers Rankings by the National Mortgage News. Stange ranked 12th on the list with year-over-year increase in dollar volume of loans originated in 2014 and 2015. She Strange logged a 78% increase in volume at Colorado Springs, Colorado-based Ent. l Members Mortgage Services, a Hutchinson, Kansas-based CUSO, presented 2016 awards to credit unions at its annual meeting in May. Recipients include: Trius Federal Credit Union, Kearney, Nebraska, the Rising Star Award for year-over-year increase in volume

among credit unions with assets under $100 million. BluCurrent Credit Union, Springfield, Missouri, the Rising Star Award for year-over-year increase in volume among credit unions with assets of more than $100 million. Credit Union of Dodge City, Dodge City, Kansas, the Shining Star Award for best in quality. Emporia State Federal Credit Union, Emporia, Kansas, Credit Union of the Year Award as top producer among credit unions with assets under $100 million. Credit Union of America, Wichita, Kansas, Credit Union of the Year Award as top producer among credit unions with assets of more than $100 million. l Radian Guaranty Inc. has been named a 2016 nominee for the Ellie Mae Hall of Fame. Radian was nominated for the Lender’s Choice Award for Best Service Provider from the Ellie Mae Network. Ellie Mae customers nominate the services providers for the annual recognition, given mortgage companies that have distinguished themselves in their use of Ellie Mae technology. l To celebrate their home purchase, the Jeanne D’Arc Credit Union Mortgage Team sponsored a housewarming party in May at the home of their new members, Rachel and Joseph Salamone. The couple, who work in different cities, wanted to relocate to make their limit their commuting time. They didn’t anticipate any issues securing a mortgage, but their primary bank required strict qualifying parameters that See “Making a Difference” on page 15

10 PIPELINE - Summer 2016

SAVE THE DATE! for

2017 Events Experience the Difference

The ‘Deep Dive’ Workshops Go East and West The Annual Conference Returns to Las Vegas

ACUMA East Coast Worksho p National Harbor, MD East Coast Workshop

West Coast Workshop

Gaylord National Resort and Conference Center National Harbor, Maryland (near Washington, D.C.)

Motif Downtown Hotel Seattle, Washington (same program as Maryland)

June 6-7, 2017

June 20-21, 2017

ACUMA West Coast Worksh op Seattle, WA 21st Annual ACUMA Conference September 24-27, 2017 Bellagio Resort and Casino Las Vegas, Nevada (on the Las Vegas Strip)

CHANGES AHEAD FOR FUNDING MORTGAGES?

Regulation and Legislation Is Fannie/Freddie Conservatorship End In Sight? By John J. McKechnie

he May announcement by Freddie Mac of a $354 million loss (its second in the last three quarters), coupled with Fannie Mae’s declining profit announced the same week, not only raised concerns about the overall health of the conserved GSEs, it also reinvigorated calls for Fannie/Freddie recapitalization and eventual release. And those calls will continue to become louder as the conservatorships near the 10 year mark in 2018, a milestone few thought possible when the troubled mortgage giants were seized by the federal government nearly a decade ago. ACUMA will be well-advised to watch the next acts in this play very closely, as the way in which mortgages are funded and sold into the secondary market could change dramatically in the next few years.

the bill, debt the GSEs owe to the U.S. Treasury would be considered repaid and the GSEs would be allowed to rebuild their capital reserves, ending the Treasury capture of the GSEs’ profits. The Federal Housing Finance Agency (FHFA), which regulates the GSEs, would be tasked with coming up with a capital restoration plan for the GSEs. Once the GSEs reach a 5% capital level, the conservatorships would end and Fannie and Freddie would resume independent operations.

PUSH TO ‘RECAP & RELEASE’

LEGISLATION FAILING SO FAR

In the last year, calls to “recapitalize and release” Fannie Mae and Freddie Mac have intensified. A wide array of groups, including consumer and affordable housing advocates, civil rights activists on the Left, as well as the mortgage investor community and a conservative member of the House Financial Services Committee on the Right, have added their voices to the chorus who say the time has come to end the conservatorships and return the GSEs to independent operations. Legislation to “recap and release”, HR 4913, sponsored by Rep. Mick Mulvaney (R-SC) a member of the House Financial Services Committee, was introduced in April. Under terms of

12 PIPELINE - Summer 2016

While Congressman Mulvaney’s approach is not considered likely to become law this year, it does give voice to the “recap and release” side in the debate. Prior attempts at legislative fixes to housing finance reform posited a future in which Fannie and Freddie would go away. Both a Senate Banking Committee bill that would create a new GSE combining private capital and a government securitization platform (the Corker-Warner bill of 2013), as well as House Financial Services Committee Chairman Jeb Hensarling’s PATH Act, which would have eliminated a federal role in securitization entirely, failed to pass either chamber of Congress.

“Prior attempts at legislative fixes to housing finance reform posited a future in which Fannie and Freddie would go away.” Credit unions voiced concerns with each of these approaches, particularly regarding the effect they would have on access to a secondary market. To further complicate the picture, a new White Paper, authored by a group of housing policy experts with ties to a possible Hillary Clinton presidency, suggests that her administration would not look favorably on the “recap and release” approach. The White Paper, “A Promising Road to GSE Reform,” rejects the notion of freeing Fannie and Freddie from conservatorship and instead recommends merging them out of existence and creating a single securitizer, called the National Mortgage Reinsurance Corporation. Regardless of which reform option ultimately prevails in the next two-tothree years, CUs should be prepared to adapt to whatever new regime emerges. John J. McKechnie is a partner at Total Spectrum, a Washington, D.C.-based team of companies providing strategic counsel and effective plan implementation using advocacy, research, communications, and political engagement. You can reach him at (202) 544-9601 or jmckechnie@totalspectrumsga.com.

EVERYTHING YOU NEED

TO ORDER MI IS AT YOUR FINGERTIPS

At United Guaranty, we are working hard to make ordering mortgage insurance the easiest part of your day. When you have an account with United Guaranty’s MI Guide®, quotes from MI NOW℠, integrated loan origination systems, and pricing engines are all seamlessly connected. The new, completely redesigned MI Guide lets you go straight from quoting to submitting your application. Find what you’re looking for right away, visit ugcorp.com/connections.

Shannon VanSickler, Vice President, Credit Union Channel | 336.778.7213 Brittany Batten, Senior Account Executive, Credit Union Channel | 404.713.9034 © United Guaranty Corporation 2016. All rights reserved. United Guaranty is a marketing term for United Guaranty Residential Insurance Company and United Guaranty Mortgage Indemnity Company. 230 N. Elm St., Greensboro, NC 27401. United Guaranty and United Guaranty’s MI Guide are registered marks. MI NOW is a service mark. Coverage is available through admitted company only.

VIEWPOINT: THE FHFA PRINCIPAL FORGIVENESS PLAN HOLDS PERIL FOR CREDIT UNIONS

Too Little, Too Late, Too Many Issues

The FHFA Principal Foregiveness Plan Holds Peril for Credit Unions By Tim Mislansky

n April 14, the Federal Housing Finance Agency (FHFA) announced its plans for principal forgiveness to seriously delinquent borrowers. In case you’ve missed it, the FHFA is the regulator for Fannie Mae and Freddie Mac. n This plan has been in the making for about two years and comes way too late, and now it will cause credit unions wanting to be “memberlicious” (deliciously member-friendly) to be caught in the cross hairs of negative borrower reaction. How so? Read on. Well, first of all the plan is designed to help a “seriously delinquent borrower,” which the FHFA defines as a borrower who was 90 days past due as of March 1, 2016, had a balance of less than $250,000 and where the LTV exceeds 115%. The idea is to forgive part of the principal so that the homeowner can retain the loan. There are specific guidelines

14 PIPELINE - Summer 2016

that must be meet and offers must be presented to borrowers by Oct. 1.

“How many of your members are upside down on a GSE loan and are also past due but not enough to hit the criteria?

PROGRAM FRAUGHT WITH RISK

On the surface this sounds good, even great if you can get past the government bailout idea. But it’s fraught with reputational risk and bad public reaction. The program is only good on loans

owned by Fannie and Freddie, and they estimate it could impact as many as 33,000 borrowers. That’s it. Fannie and Freddie own millions of loans, so nearly 100% of them will not be eligible. How many of your members are upside down on a GSE loan and who are also past due but just not enough to hit the criteria? I’m sure it’s a few. What do you tell them if they hear about the program and call you? “I’m sorry, you worked hard to keep your home and struggled to make payments and since you are not 90 days past due you don’t qualify.” That will be a fun conversation. And since it’s only good on Fannie and Freddie loans, what about those borrowers who took out FHA, VA or USDA loans? The GSEs may buy these loans, but their pricing indicates they don’t really want them. So must credit unions sell these to other aggregators or use a Ginnie Mae approval? Here’s another conversation:

VIEWPOINT: THE FHFA PRINCIPAL FORGIVENESS PLAN HOLDS PERIL FOR CREDIT UNIONS

“I’m sorry, because you took out a VA loan as a veteran and we didn’t sell your loan to Fannie, you don’t qualify. Thanks for your service.” Or “I’m sorry, because you used the FHA program for your loan; we can’t offer this program to you and the foreclosure process will start soon unless we get a payment.”

PORTFOLIO LENDING ISSUES

And then there’s credit union’s portfolio lending. Members don’t want their loans sold. (Actually they most don’t want their servicing sold, but they don’t know the difference). So you keep the loan. Or you offer a portfolio product. Is your credit union going to offer principal forgiveness to match the FHFA program? We don’t have the money printing capabilities of the U.S. Treasury, so I would assume most will not. Our obligation is certainly to help the member, but also the support the entire cooperative. Explain that to a member who is 90 days past due and in jeopardy of losing their home. And finally, the financial crisis and housing crisis is in the rear view mirror. The conservatorship was eight years

“Whether you’ve sold loans to Fannie or Freddie in the past, or you have or don’t have any members who meet the criteria, you darn well better make sure you understand this program.”

ago. Most issues, except what to do with Fannie and Freddie, are behind us. This involved millions of hard-working Americans who lost their homes (and some not so hard-working Americans

who greedily tried to exploit the system for huge personal gains). If my house was foreclosed upon five years ago, I’m asking why this program wasn’t around then, and I feel like I got treated unfairly. So whether you’ve sold loans to Fannie or Freddie in the past, or you have or don’t have any members who meet the criteria, you darn well better make sure you understand this program and provide some talking points to your mortgage team. While this hasn’t made big news in the media, it certainly may. If you want to stay “memberlicious,” you better be ready to talk with members who did not or cannot qualify. Tim Mislansky is the Senior Vice President and Chief Lending Officer at Dayton, Ohio-based Wright-Patt Credit Union, and President of its wholly owned CUSO, myCUmortgage, LLC . He is also the secretary of the ACUMA Board of Directors. This article has been adapted with permission from Mislansky’s online blog. The views expressed are his alone. Sign up to follow his blog at mortgagesareamemberlicious.com.

“Making a Difference,” continued from page 10 the Salamones could not meet, especially when they had to also sell the home they were living in at the time. They were introduced to Bo Stevens, Senior Loan Officer at Jeanne D’Arc, who was able to get them approved for a mortgage and into the home of their dreams. To celebrate, the couple opened up their new home in Bedford, Massachusetts, to celebrate with 50 of their friends, family and co-workers, their Realtor and members of Lowell, Massachuetts-based Jeanne D’Arc’s Mortgage Team. “We had some pretty challenging days when it seemed that everything [about the loan ] was going to fall apart,” said Rachel Salamone. “The absolute best part of our experience was working with Jeanne D’Arc and

TELL US ABOUT YOUR NEWS

Friends, family and co-workers of Rachel and Joseph Salamone gather at the Salamone’s home in Bedford, Massachusetts for a housewarming party, which was sponsored by Jeanne D’Arc Credit Union.

Bo. Bo took all of the stress out of it. He and his team were super responsive, informative, and stayed on top of anything that could have resulted in a delay or hassle for us.”

We publish news of credit union real estate industry honors, awards and recognitions of individuals and organizations. We also publish news of housing-related community recognitions, such as Habitat for Humanity projects and National Association of Realtors cooperative ventures. Send your news to bob.dorsa@ acuma.org and include who, what (be specific), when, where and, if desired, a head-and-shoulders photo (150 dpi) identifying the person being honored (name, title, organization). Deadlines are November 15 for the Winter Issue and May 15 for the Summer issue.

Summer 2016 - PIPELINE 15

IN THE PIPELINE: INSIGHTS AND OBSERVATIONS ON CU MORTGAGE LENDING

CFPB Puts Consumer First Credit Unions Need to Redefine Member Satisfaction in Light of TRID By Mark McElroy

or the last nine months, mortgage lenders of all stripes have been consumed by TRID—and with good reason. n The magnitude of change TRID has spurred in the mortgage industry is unparalleled in recent memory. However, TRID is about more than just a change in mortgage documents; it represents a change in expectations about the minimum level of service mortgage lenders should be providing to consumers. Every action the Consumer Finance Protection Bureau (CFPB) has taken since its inception—from addressing Unfair, Deceptive or Abusive Acts or Practices (UDAAP) to enforcing the 2012 National Mortgage Settlement to the agency’s reaction to Quicken Loans’s Rocket Mortgage launch during the Super Bowl—has been driven by a “consumers first” mandate. The consumer experience matters, and to disregard or misinterpret it puts you on the wrong side of the CFPB. Credit unions are no stranger to a consumer-centric mentality, as member satisfaction is par for the course in terms of day-to-day consumer interaction. However, the CFPB’s mandate speaks more to how transactions are conducted on the back end and the impact of these “business as usual” transactions on the consumer.

16 PIPELINE - Summer 2016

PART OF THE BIGGER PICTURE

Think about it this way. TRID is part of the CFPB’s larger “Know Before You Owe” initiative, which also includes the recent eClosing pilot. Both indicate the CFPB’s desire to see mortgage lenders change the operational aspects of how mortgages are originated and closed because the CFPB has observed how little the current mode of operation benefits the consumer. This type of change goes beyond everyday customer service and speaks to building a process around the consumer. Take, for example, TRID’s guidance on the timing of Closing Disclosure (CD) delivery. TRID requires that consumers receive the CD at least three days prior to closing to provide adequate time for

the consumer to review and understand the document. For lenders that still mail paper copies of disclosures, there is an additional “snail-mail” period that must be added to the three days prescribed by TRID. As a result, these lenders are looking at a six- to seven-day waiting period from the day the CD is mailed to when closing can occur. Since the closing date is determined at the start of the transaction, lenders and settlement service providers are working to a deadline. When challenges arise that make meeting the deadline impossible, lenders are forced either to delay the closing and inconvenience borrowers or potentially violate TRID to close on time. Furthermore, in a paper closing, it is difficult to prove that the borrower actually reviewed the CD as soon as it was

IN THE PIPELINE: INSIGHTS AND OBSERVATIONS ON CU MORTGAGE LENDING

“The consumer experience matters, and to disregard or misinterpret it puts you on the wrong side of the CFPB.” received, thus creating another potential compliance issue for lenders. What this illustrates is the weight the CFPB places on consumer satisfaction over mortgage lender convenience. Though the TRID rule is light on specifics regarding how the CFPB expects lenders to comply, the Bureau has intimated a possible solution, one which shares its origins with TRID: eClosing.

RESULTS OF E-CLOSING PILOT

According to findings from the CFPB’s 2015 eClosing pilot: n eClosing participants receive documents sooner and review documents earlier than borrowers in paper closings. n eClosing participants also experience greater perceived empowerment and efficiency and understand the transaction better. n Last but certainly not least, eClosings are generally shorter than paper closings, particularly for purchases.

“eClosing provides credit union mortgage lenders with much-needed audit support.”

Thus, eClosing adoption is a simple way for credit unions to signal to the CFPB that customer satisfaction is a top priority. This theory has not gone untested, as credit unions were part of the eClosing pilot and have been among the early adopters of eClosing technology. At the same time, eClosing provides credit union mortgage lenders with much-needed audit support. With today’s eClosing technology, lenders have access to a verifiable audit trail that demonstrably proves when the CD was sent, when the borrower acknowledged receipt and opened the CD and how long the borrower spent reviewing it. In addition, by providing the CD to the borrower in an electronically secure environment, lenders avoid having to tack

on additional time to account for delivery via U.S. Mail. While eClosing technology is not a panacea for all of credit unions’ TRID woes, it can provide considerable relief for several major aspects of the rule. What’s more, adoption of eClosing technology very clearly aligns an organization with the CFPB’s mission, vision and values, which can, in turn, engender some very valuable goodwill with the CFPB. Thus, credit union mortgage divisions would be well advised to become champions of eClosing technology within their organizations. Mark McElroy is CEO & President of Pavaso, a provider of electronic collaborative technology solutions for the real estate life cycle. He can be reached at mmcelroy@pavaso.com.

Summer 2016 - PIPELINE 17

Shared Vision. Mutual Pride.

Planning, experience and resources lay the groundwork for the future. Our partnership with you supports improvement and growth for your community.

Our members have the opportunity to earn credit enhancement fee income while leveraging secondary market options available through the Mortgage Partnership Finance® Program. Contact us today to find out how your institution can share the benefits of the MPF® Program with your community. Visit www.fhlbmpf.com or call 877.463.6673

“MPF” is a registered trademark of the Federal Home Loan Bank of Chicago. The “MPF Mortgage Partnership Finance” logo is a trademark of the Federal Home Loan Bank of Chicago.

ACUMA 20TH ANNIVERSARY CONFERENCE

Register Now Online at acuma.org for 2016’s Biggest Event in Credit Union Mortgage Lending In 20 years, ACUMA has grown from a handful of credit union leaders trading notes to a vibrant organization providing mortgage-lending CUs access to the industry’s leaders, innovators and peers to learn and share the knowledge. ACUMA has built its foundation on education and networking. Now, to celebrate its growth—along with the growth of credit union mortgage lending—ACUMA invites you to our nation’s capital to join the discussion about next steps to keep building on success.

Washington, D.C. n September 18-21, 2016

Lawrence Yun NAR Chief Economist

Juliet Funt

Craig Martin

Brian Chappelle

WhiteSpace at Work CEO J.D. Power Sr. Director Potomac Partners Founder

Jim Nussle

Dan Berger

CUNA CEO

NAFCU CEO

The 20th anniversary conference brings you to Washington to: n Hear presentations by congressional representatives, industry leaders and top government regulators. n Discuss important mortgage-lending issues with your peers, presenters and a variety of government officials engaged in legislation and regulation affecting the mortgage lending industry. n Learn more about how to advocate for credit union mortgage lending and why it’s so important to the future. n Participate in ACUMA’s special 20th anniversary events, including a closing-day rooftop luncheon overlooking the Capitol and a luxury bus tour of beautiful Washington, D.C. The conference is held at the Renaissance Downtown Washington, D.C. Hotel, a high rise less than a mile from the White House and just over a mile to the Washington Monument. In addition to conference facilities, the hotel offers three restaurants, a bar, coffee shop, full-service spa and fitness center.

IN THE PIPELINE: INSIGHTS AND OBSERVATIONS ON CU MORTGAGE LENDING

Crunched for Time? Insure Your Loans Faster When You Plan Ahead

n the post-TRID world, credit union professionals find that time is more than ever at a premium. As new regulations complicate the business, mortgage loans need more time to process, but your fee stays the same, whether you spend three hours or six hours on a given loan. How can you underwrite more business in less time? If your loans require mortgage insurance (MI), work with your provider to minimize delays.

TIPS FOR QUICKER MI UNDERWRITING

Credit unions pressed for time want to know how they can be certain that the loans they submit for mortgage insurance will be turned around quickly. While there’s no iron-clad guarantee, CUs can consider these recommendations to streamline their process and reduce delays: Don’t fax or email the loan file; submit it online. Online means faster, more secure, always legible and fewer errors.

20 PIPELINE - Summer 2016

Make sure your loan file includes all required documents and information. For example, if there is a co-borrower on the loan, don’t forget to include the relevant credit information. Review the loan application form (1003) and ensure it is fully completed. This gives the underwriter the full “story,” reducing follow-up questions. Check that no unnecessary documents are included in the file, because the MI underwriter is required to review each one, even if it is irrelevant to the decision. Examples include disclosures, state tax returns and condo bylaws. The underwriter will let you know if they need additional information. Once your file is underwritten, if there are any conditions on the loan, submit them all at once. This reduces multiple “touches” by the underwriter, thus speeding up the approval process. Run your scenario through an automated underwriting system (DU® or LP®) and process the loan based on those findings. Adjust the scenario and see how the findings may change, depending on the credit score, LTV, loan program, etc. A fully processed and verified file can be turned around quickly by the MI underwriter. If available, sign up for your MI provider’s Loan Alert system. You’ll receive an automatic text or email whenever the status of your loan changes, allowing you to track your pipeline more easily. “Incorporating these tips into your routine will shorten turnaround times,”

“Credit unions pressed for time want to know how they can be certain that the loans they submit for mortgage insurance will be turned around quickly.”

says Karen Wilhelm, Underwriting Manager at Arch MI. “While initially you might have to take more time to remember to do the checks, you will eliminate the delays and back-and-forth between the underwriter and your staff down the line. “The result will be a boost in overall efficiency, speed, and accuracy for your MI-insured business.” This article was provided by Arch Mortgage Insurance Company, which provides mortgage credit default protection using proven systems supported by experienced professionals dedicated to making customers the top priority and providing outstanding service with a personal touch. Arch MI believes in the value of mortgage lending, and providing lending customers with products and services to help their borrowers achieve homeownership.

DELIVERING VALUE TO OUR CREDIT UNION PARTNERS At Radian we’re redefining what it means to be a mortgage insurance provider. Our dedication to helping Credits Unions provide solutions for their members is unparalleled. With services that span the mortgage spectrum, we’re more than a reliable partner, we’re an indispensable one. • • • •

Dedicated Credit Union Team to better serve your unique needs Innovative programs for members, including MortgageAssureSM and Timely Rewards® Best-In-Class pricing exclusively for our Credit Union partners Radian family of companies provides a full spectrum of mortgage and real estate services

Contact us today to learn more about all that Radian has to offer! Bill Walker National Account Manager, West 714.330.5895 bill.walker@radian.biz

David Mills National Account Manager, East 937.321.6641 david.mills@radian.biz

David Shuart, CMB National Account Manager, West Central 214.906.3322 david.shuart@radian.biz

Paul Gawin, CMB National Account Manager, East Central 513.659.8977 paul.gawin@radian.biz

Tammy Fitzpatrick Account Manager, West 215.231.1181 tammy.fitzpatrick@radian.biz

Michael Mullarkey Account Manager, East 215.231.1420 michael.mullarkey@radian.biz

www.radiancu.biz | 877.723.4261

IN THE PIPELINE: INSIGHTS AND OBSERVATIONS ON CU MORTGAGE LENDING

Home Buyer Profiles NAR Survey Shows a Changing Market

he median age of a U.S. home buyer has climbed five years since 2010. Married couples comprise 67% of home buyers, an increase from 58% in five years. Homes purchased by single females has fallen by almost half during the same period. These statistics are among the most revealing of the numbers documented in a recent research project by the National Association of Realtors. The data offer opportunities for mortgage-lending credit unions to develop strategies to attract home buyers. It’s important to understand today’s home buyers so you can be ready to tailor loan products, especially for younger buyers, when they decide to seek home ownership. The NAR’s “2015 Profile of Home Buyers and Sellers” includes 6,363 respondents who bought homes between July 2014 and June 2015. It shows an upward trend in the age of home buy-

ers overall and the lowest percentage of first-time home buyers ever uncovered in the annual NAR survey. Importantly, the survey showed that 87% of the home buyers purchased their home through a real estate agent or broker. For credit unions that have not reached out to Realtors, now is the time to establish relationships. The statistics demonstrate the changes taking place among home buyers, as well as implications for mortgage sellers. As Millennials (born between 1980 and 1995) continue to reach adulthood and secure employment—they are expected to comprise 50% of the U.S. workforce

“According to a Fannie Mae study, more than 90% of Millennials want to own a home ‘eventually,’ but many are waiting longer …”

by 2020—the issues they face are making a major impact of how, and when, homes are bought and sold. In NAR’s most recent profile, firsttime buyers comprised just 32% of the market for new and existing homes, the lowest percentage recorded. Many factors are influencing the slowdown, especially among Millennials.

THE WAITING GAME

According to a Fannie Mae study, more than 90% of Millennials want to own a home “eventually,” but many are waiting longer to ensure they can afford the expense (or even qualify for a loan), as well as match their lifestyle choices. The study notes that Millennials are staying in school longer and waiting longer to get married and have children. A significant subgroup of Millennials also prefer urban living, where a higher percentage of the population are renters. Also mentioned prominently for Millennials who pursue college degrees is the rising amount of student debt they are accumulating: the national average has topped $25,000. These factors have combined to delay home purchases by younger buyers and slowed the growth of mortgage

22 PIPELINE - Summer 2016

IN THE PIPELINE: INSIGHTS AND OBSERVATIONS ON CU MORTGAGE LENDING

originations. The U.S. Census Bureau reported that while Millennials comprised 28% of the U.S. population in 2014, only 17% were the head of a household (own and rent) and just 8% owned homes. The Fannie Mae study also notes that the Millennial generation’s cautious approach has been shaped by incidents in their youth, including the 9/11 terror attacks and the 2008 financial crisis.

OTHER TRENDS

Reflecting the recent financial crisis, the NAR study showed that percentages of single male and female home buyers in the overall market are down by 5 percentage points (20% to 15% for female; 12% to 7% for male) from five years ago. The average first-time buyer in the study was 31 years, earned $69,400 annually and bought a home priced at $170,000. The average repeat homebuyer was 53, earned $98,700 and paid $246,400. Senior housing made up just 8% of the study’s participants; unmarried couples comprised 7%. And 13% lived in multigenerational housing (excluding children). Also, home buyers with student debt included 25% of the overall sample.

“Also mentioned prominently for Millennials who pursue college degrees is the rising amount of student debt they are accumulating …”

CHART 1

HOME BUYER COMPARISON

Median Age Gross Household Income Married Couple Single Female Single Male Unmarried Couple Children in Home Owns Second Home

2010 2015 39 44 $72,200 $86,100 58% 67% 20% 15% 12% 7% 8% 7% 35% 37% 14% 19%

Source: National Association of Realtors “2015 Profile of Home Buyers and Sellers”

But credit unions must be vigilant to stay ahead of the curve. For all the delays, for example, Millennials will seek homes to buy as they grow older, and recent study points to them pursuing home ownership in larger numbers. The “Home Buyer and Seller Generational Trends Report 2016” conducted in July 2015 by NAR for home buyers during the previous year showed that about one-third of those were Millennials—more than either Baby Boomers or Gen Xers (the smaller-in-population generation between the two).

FOOD FOR THOUGHT

The data indicate that successful mortgage lenders must: Work with Realtors, who have established relationships with sellers and buyers alike and know their communities— just like credit unions. Bring them into the CU for product updates and include some snacks and soft drinks. Invite them to lunch to talk about working together. And most of all, keep them in the loop when their loan is in your pipeline. Be agile in responding to changes in housing trends (Are condos selling well? Starter homes? Retirement communities?). What has worked in the past won’t work in the future. Know your membership—and the potential for new mem-

bers; be ready when they want to establish and build relationships with you. Build and develop all channels— online, branches, telephone—whatever works for any member; convenience is king. Make sure your processes are efficient and easy for your members to use. Aim high: You may not be able to close all loans in 30 days, but you should make it your goal. Offer diversity in your loan products. What do your members need? If you can offer non-conforming loans that help them but don’t put your CU in harm’s way, go the extra mile; it’ll come back to you in good ways and help you attract a bigger wallet share, too. Ask yourself, constantly, are we doing the best we can? If so, make sure your community knows it—talk yourself up where potential members can find out about you. And get involved in the community by sponsoring fundraising events and volunteering for community service. Credit unions that study home buyer trends and apply the knowledge to their own membership can succeed in the mortgage market into the future. For more information on the NAR survey, visit www.realtor.org/reports/ highlights-from-the-2015-profile-of-homebuyers-and-sellers.

Summer 2016 - PIPELINE 23

2016 ACUMA WORKSHOPS

Workshops Provide ‘Deep Dive’ into Topics The 2016 ACUMA Workshops provided in-depth material on mortgage lending trends and credit unionspecific content, receiving high marks from attendees. Held over two days in Tempe, Arizona and San Antonio, Texas, the sessions brought to participants opportunities for extensive networking with other CU mortgage leaders, as well as conversations and questions for the many expert speakers. Mortgage-centric topics delved into the latest on fraud, compensation, recruiting and hiring, and more. The combination of presentations and talk-show

Andy DeLuca, Kinecta FCU, and Liz Brink, WrightPatt Credit Union, discuss what it takes to be a “top Gun” loan officer.

interview formats kept things interesting. Generational expert Phil Gwoke led interactive sessions that explored generational differences of employees and how to work collaboratively—a necessity for CUs moving forward as Boomers retire and Millennials soon to hold half of the jobs in the U.S. workplace. (See related article in this issue.) Dates and locations for the 2017 workshops are set: June 6-7 in Oxen Hill, Maryland (near Washington, D.C., and Alexandria, Va.) and June 20-21 in Seattle (programs are the same).

Moderator Tracy Ashfield (right) talks about how recent regulations have caused credit unions to restructure their mortgage operations with Dwana Manning (left), Delta Community CU, and Marsha Bradshaw, Tower FCU.

Consultant Phil Gwoke talks about generational differences and how they affect the workplace at the San Antonio workshop.

24 PIPELINE - Summer 2016

2016 ACUMA WORKSHOPS

CUNA’s Michael Christians presents the latest on compliance issues to workshop attendees in San Antonio.

Above: Casey Filburn, Wells Fargo, and Marsha Bradshaw, Tower FCU, share how their credit unions are using multiple channels to provide optimal member access at the Tempe workshop. Right: California attorney and regulatory specialist Mark Aldrich leads a workshop session on mortgage fraud.

2017 Workshops—Save the Dates! n JUNE 6-7 IN NATIONAL HARBOR, MARYLAND (NEAR WASHINGTON, D.C.) n JUNE 20-21 IN SEATTLE Summer 2016 - PIPELINE 25

FEATURE ARTICLE

26 PIPELINE - Summer 2016

LOAN LEAKAGE

Mortgage Loan Leakage Are You Optimizing Your Process to Capture Business … Or Letting It Seep Away? By Tom Burton

Americans have become a society of shoppers. With communications moving into the digital age, it’s pretty simple to shop online—with a laptop or smartphone. And that only adds to the omnipresent marketing of shoppers on TV and radio, billboards, through the mail, by phone, etc. n Credit unions in general have a good online presence. They get lots of shoppers and loan applications online to supplement other channels (at branches, on the phone, through advertisements). n Since the 2008 financial crisis, credit unions increasingly have become an attractive source of mortgage loans, and getting more shoppers means more potential closings. And price isn’t the only factor for many shoppers—they want to do business with someone they trust, giving credit unions an advantage. n The trick is to make the most of these shopper opportunities. Before you go searching for new business, make sure you are capturing the opportunities that are right in front of you. Summer 2016 - PIPELINE 27

LOAN LEAKAGE

“Everybody’s talking about finding new sources for leads and loans,” says mortgage lending consultant Tracy Ashfield. “But too often when a credit union starts to really focus on lead management, pre-approval conversions and follow-up, they find they are missing out on opportunities that have already come in the door.” Imagine for a minute that on Monday morning the mortgage department at your credit union returns to work with 50 applications awaiting the overtaxed loan officers. Even when the new apps are divided among them, they can’t get to every one, so they focus on to the ones they think have the best chance of closing. The rest? It’s likely they are ignored or put on the back burner where they will be forgotten when the next week’s apps arrive and the cycle begins again. That’s major leakage. Loan apps that don’t get immediate attention, and even ones that don’t get approved, should not be swept under the rug. Potential remains for the shopper to return later under better condition. But left unattended, this loan leak will flow elsewhere—to another lender most likely. It’s the first point in the loan pipeline where opportunities are lost. But not the only one. A smart credit union will develop a strategy to plug leaks and improve the pipeline to keep communications open.

pipeline. You may not win all of these battles, but you surely will lose them all if you don’t nurture the potential relationship. If they seek pre-approval, let them know, quickly, if you can get it done. If yes, keep in touch—find out what they need and who they’re working with on the home purchase. Then bring that person into the loop. Even if the shopper doesn’t qualify for a loan—and you’ve tried everything you can, stay in touch with them. Their situation may change, or you may expand your own loan products. Finally, the “Ready to Close” shoppers want to move fast. They are looking to refinance—now—for a better rate. They have likely already done their shopping, so if they don’t get a prompt response from you, they are on to their next option— and quickly. This leak occurs when an inquiry is made and follow up is not taken after the information is supplied. For instance, the Ready to Close shopper fills out an application and then waits for approval … and waits. And moves on—another leak that should have been plugged, could have been plugged by a loan department that asked the right questions during the inquiry and made certain that follow-up action would be taken in a matter of days.

IMPROVING THE PROCESS

Each of these groups brings a different challenge to the mortgage department. When credit unions focus only on the Let’s divide mortgage loan shoppers into three main group that is closest to closing on a loan, they miss the opporgroups. Each group brings a varying commitment to obtaining tunities that can turn into closings next month. a loan. But all three are important to engage because eventually Applicants should expect a response in a few days. Those all of them are likely to buy a home. that don’t get one—they’ll go elsewhere. And it doesn’t matter The first group can be called “Get Organized” shoppers. which shopper group they fall into: Without contact, they are They want to know what you have to offer. Providing informa- lost, maybe moving on to a Big Bank or checking out Quicken. tion on your loan program and steering them to an application The challenge, then, is to find a way to plug the leaks. Evis the easy part. More of a challenge is staying in touch. These ery mortgage-lending credit union has processes in place deshoppers will drift away from you without encouragement. signed to get the loans to closing. How well that process works It’s important to engage them, find out what they need should be measured in some way with an eye toward making and deliver it. Then stay in touch. Automated communications improvements. Let’s talk about how that can happen. can provide one avenue. Campaigns—postcards, newsletters, First, examine your processes to see where leaks are ocemails, phone calls—can be handled internally or outsourced curring. Can you quantify them? Surely you can examine the to a vendor. They key is staying in touch, responding to further percentage of apps that close—that’s one way. A more difficult inquiries, providing a route through your pipeline. measurement is the number of leads—do you know how many Next come the “Shop and Buy” group. They are usually al- leads turn into apps, and then how many close? ready working with a Realtor, looking As you dig deeper you can uncover at properties and ready to make an potential glitches along the pipeline. offer on one they like and can afford. “Loan apps that don’t For instance, how many handoffs ocThese more serious shoppers are comcur when a mortgage lead is fielded? get immediate paring rates, but also examining cusLogic tells you the more handoffs, the tomer service and other factors such better chance of leaks. Then, can you attention, and even as convenience, existing relationships streamline the process? ones that don’t get with financial institutions and—not Another key question: How do least important on their list—the adyou follow up on leads in general and approved, should vice of their Realtor about whom to applications in particular? Is there a not be swept under checklist of actions and a time frame? contact for a loan. It’s vitally important, then, to put Who are the people involved? How the rug.” your best face forward to these shopdoes the process vary depending on pers—or face another leak in your the channel? For example, does a face-

SHOPPING GROUPS

28 PIPELINE - Summer 2016

LOAN LEAKAGE

“When credit unions

to-face application in a branch prooffs, more incentives, a different path ceed the same way along the pipeline for the pipeline, a change in a job defocus only on the as an online app? scription. Whatever improvements are group that is closest “Managing incoming leads is considered, involve staff in the discuscrucial,” notes consultant Ashfield. sions and emphasize the importance to closing on a loan, “And although ideally handled by a of the project. Post a timeline for outthey miss the loan officer, many credit unions have comes and stick to it. Share the final found sales assistants or loan officersproposal with leadership. If you’ve got opportunities that in-training are able to provide initial their support, you can move forward. can turn into follow-up on incoming leads.” Armed with your findings, you Incentives are another point of can now set goals for the proposed closings next month.” discussion. How are leads rewarded? improvements. Project the increased Are CU employees outside of the percentage of loan closings under mortgage department included? If so, the improved processes, for instance. what defines a lead and what information is gathered? How does that increase the numbers? More loans closed Check in with your peers. Find out how other credit unions means more members in homes, as well as more dollars for have laid out processes. How do they plug leaks? the credit union. Finally, get buy-in from your leadership. That doesn’t mean And finally, a boost in the ROI will allow you to justify the you need to start with a big budget request or ask for support expense of the improvements. for major changes. Begin with fact finding and build a case. If you aren’t able to identify improvements in this step and later Tom Burton is a freelance writer and editor who worked for justify related expenses, you won’t proceed anyway. 10 years in the credit union industry. He provides communicaAssuming you do identify potential improvements, the tions consulting for ACUMA. Previously, he was an editor and next step would be to propose changes. Maybe it’s fewer hand- manager at a daily newspaper.

Working for You Las Vegas, NV

89140

years, In the past five adrupled qu ve ha s credit union rtgages mo st fir their share of ited States. written in the Un “Experience the CU

Difference” and find

out why.

Diff ere nce Exp erie nce the ns e-lending credit unio ciation for mortgag

asso The premier trade

acuma.org

NAR’s 2016 Union Exhibit at Visit our Cre®dit o in Orlando nference & Exp REALTORS Co ns, it unio working with cred For information on org RENCE@acuma. email CUDIFFE

CUMA provides unsurpassed educational and networking opportunities for mortgage-lending credit unions. One initiative is working to cultivate relationships with The National Association of Realtors (NAR) and the Realtors themselves—like credit unions, an organization and individuals that work within their own communities to help people buy homes. In the upcoming August-September issue of Realtor magazine, sent to 1 million-plus NAR members, ACUMA is running the accompanying advertisement to raise recognition of credit unions and help Realtors see the advantages of working with CUs.

Help us tell Realtors about the credit union difference—that CUs are a viable lending source—by supporting ACUMA’s presence at the annual NAR convention in Orlando in November. Your contribution help raise awareness of credit unions and establish relationships with some of the 15,000 Realtors in attendance at the convention who interested in working with CUs. For more information, Contact ACUMA President Bob Dorsa at bob.dorsa@acuma.org or (877) 442-2862.

Summer 2016 - PIPELINE 29

FEATURE ARTICLE

Filene Studies Loan Motivators

What Drives Credit Union Members to Choose Loans from Their CU ... or Someone Else? The Filene Research Institute recently published an extensive study to understand not only why members prefer credit union loans, but what specific drivers move them to use competing banks and credit unions. The next eight pages (reprinted with permission) contain key findings of the study, which consisted of interviews with more than 5,000 current CU members who applied for a loan within the past three years.

s the Filene report notes, “With high-value loans like mortgages, home equity lines of credit (HELOCs), and even auto loans, it will be years before members are back in the market. That makes it essential to understand why your members do choose your loans, and, more importantly, why they bypass you for competitors.” In the report, “A Wallet Application Rule Approach to First Mortgages” by Lerzan Aksoy, Professor of Marketing at Fordham University, Filene focuses on first mortgages and what credit unions can do to capture a significant share of this market. Here are some of the common themes that emerged from the research: Credit unions must do a better job of making their members aware of their ability to offer the loans that best meet members’ needs.

30 PIPELINE - Summer 2016

Among members who chose the credit union for their mortgage, the most important factor in their choice was their perceived relationship with the institution. Banks are perceived as offering “better fitting” loan types and appear to have better relationships with mortgage brokers. Members value price (i.e., loan interest rate) as an important driver for mortgages regardless of the financial institution. The introduction to the report can be found on the Filene website: filene.org/research/report/a-wallet-allocation-ruleapproach-to-first-mortgages Filene members can download the entire report, and much other valuable research. Our thanks to Filene for allowing ACUMA to publish a snapshot of the report on the next pages of the Pipeline.