fairwinds

Driving Non-Interest Income By
Cross-Selling Each Mortgage
Moment
PURCHASE POWER:
Win More of Your Mortgage Market
1
MPP-1238408.1-0615-0717
CUNA Mutual Group Proprietary | Reproduction, Adaptation or Distribution Prohibited | © 2015 CUNA Mutual Group, All Rights Reserved.
1
Homebuyers
Finding a
Home at
Credit Unions
January 11, 2015
Feb. 27, 2014
Credit Unions
Offer
Creative
Home Loans
Attractive
Mortgage
Terms Draw
First-Time
Home Buyers to
Credit Unions
April 17, 2015
April 18, 2015
Credit Unions
Target FirstTime Buyers
with
Aggressive
Incentives
2
CU SHARE OF MORTGAGE
ORIGINATIONS SOARS
$40
Credit Union Market Share
Trends
$35
10%
9%
8%
$30
Balance sheet liquidity
can be a powerful tool
7%
$25
6%
$20
5%
$15
4%
3%
$10
2%
$5
Improved performance in
purchase-oriented markets
Provide products that
members need
1%
$0
0%
Sep-07Sep-08Sep-09Sep-10Sep-11Sep-12Sep-13Sep-14
Credit Union Mortgage Originations ($B)
Source: NCUA, MBA
3
AGENDA
1
2
3
Factors
Influencing U.S.
Housing Sales
and Mortgage
Lending
Leveraging
the Mortgage
Experience
Best Practices to
Grow Your Share
of the Mortgage
Market
4
1
FA C TO R S
INFLUENCING
U. S. H O U S I N G
SALES AND
M O RT G AG E
LENDING
Prices
Rates
Buyers & Sellers
5
HOME PRICES ARE
RISING AGAIN
Prices
Freddie Mac House Price Index
170
Home Price Index
160
150
140
130
120
110
Home prices are rising and
gaining back a significant
share of the losses
experienced since the
Great Recession
Refi opportunities still
available with still-low rates
100
6
RATES REMAIN LOW—FOR NOW
Rates
Interest Rates and Recessions
(1988-2015)
12
Fed is expected to begin
raising interest rates
this fall
10
8
6
4
2
0
88 90 92 94 96 98
Recession
10-yr Treas
0
2 4 6
Fed Funds
8
10 12 14 16 18
Baa
Economists forecast a
gradual increase in the Fed
Fund rate at about one and
a quarter percent annually
for the next three years
Forecast
7
DELAY IN HOUSEHOLD
FORMATION
Buyers & Sellers
Homeownership Rates by Age
90
Young consumers
have had difficulty
purchasing homes
80
70
Percent
60
According to Moody’s
Analytics, millennials are
increasing consumption
50
40
30
20
10
0
<35
35-44
2005
45-54
55-64
>65
While only 24% of 18-29
year olds own homes, 60%
plan to buy according to
the Demand Institute
2014
Source: Census Bureau
8
“ Early career economic conditions have large and lasting
impacts on lifetime wages, particularly for college
graduates. … Workers who start their careers in a
recession earn 2.5 to 9 percent less per year than those
who do not for at least 15 years after starting a career.
”
THE COUNCIL OF ECONOMIC ADVISERS
9
WHO’S SELLING
(AND MOVING UP & ON)?
14%
27%
Gen X (35-49)
Older Boomers (60-68)
Younger Boomers (50-59)
Seniors (69-89)
Millenials (34 and younger)
16%
20%
23%
10
“Now is the real opportunity. We have an
entire new generation of young borrowers
entering the home-buying marketplace.
”
BOB DORSA
PRESIDENT, AMERICAN CREDIT
UNION MORTGAGE ASSOCIATION
11
2
LEVERAGING
THE
MORTGAGE
EXPERIENCE
Connecting
with Millennials
Stronger Member
Relationships
Cross-selling
Opportunities
12
Connecting with Millennials
DECLINE OF CU MEMBERS IN PEAK
BORROWING YEARS (AGES 25-44)
1989
2014
51%
35%
13
“
Members’ average age is 48.5; nonmembers’
average age is three years younger.
Attracting more young adults continues
to be a challenge for most credit unions.
”
STATISTICS FROM CUNA’S NATIONAL
M E M B E R & N O N M E M B E R S U RV E Y
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Stronger Member Relationships
MORTGAGES ARE A STICKY PRODUCT
“ Once they get a mortgage here,
they just don’t leave us.”
KEVIN STRANGMAN
SVP/LENDING, ALTRA CREDIT UNION
15
LEVERAGING THE MORTGAGE
EXPERIENCE TO BUILD
WALLET SHARE
80%
Cross-selling Opportunities
Importance of Mortgage
Transactions
Mortgage transactions
lead to PFI relationships
and more business
60%
40%
Raddon’s Conclusion:
Real estate lending is the
most effective platform for
cross-selling other products
20%
0%
Brings All
Brings All Loan Considers CU
Deposit
Business
as PFI
Member
with
CU
Mortgage
Business
Source: Raddon Financial
16
“ There’s so much opportunity here.
Mortgage lenders have their members’ whole
financial snapshot right in front of them.
”
KEVIN STRANGMAN
ALTRA FEDERAL CREDIT UNION
17
3
5 BEST
PRACTICES
TO GROW
YOUR SHARE
OF THE
MORTGAGE
MARKET
18
MEET
FAIRWINDS
CREDIT
UNION
WWW.FAIRWINDS.ORG
Chiefly serves OrlandoKissimmee-Sanford FL MSA
$1.86 billion in assets,
189,875 members
On pace to double its mortgage
volume this year about $100
million in 2014, following major
reorganization and introduction
of niche mortgage products
19
Based in Onalaska, WI, a top 5 MSA
in the nation for mortgage volume
held by credit unions
$1 billion in assets, 85,000 members
Top mortgage lender in region;
holds 27-28% market share
MEET
ALTRA
FEDERAL
CREDIT
UNION
(WWW.ALTRA.ORG)
On pace for $260 million in mortgages
this year, up 20% over 2014
20
Based in Indianapolis
MEET
FORUM
CREDIT
UNION
(WWW.FORUMCU.COM)
$1 billion in assets,
120,000 members
61% of 2014 mortgage loan
volume was purchase loans
5 mortgage officers drum up
referrals to keep 4 internal
loan officers busy
21
1. Know Your Members,
Know Your Market
5 BEST
PRACTICES
TO GROW
YOUR SHARE
OF THE
MORTGAGE
MARKET
2. Build Referral Relationships
3. Structure Your Mortgage
Department for Success
4. Deliver Exceptional
Member Service
5. Build on the Mortgage
Connection
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1. KNOW
YOUR
MEMBERS,
KNOW YOUR
MARKET
Identify
opportunities
by delving
into the data
Find out
what members
want — and
deliver
23
FAIRWINDS Credit Union, Orlando, Florida,
expects to double loan origination volume in 2015
following a mortgage department reorganization
based on data analysis that found:
ONLY 15% of its
members were getting their
mortgages from their credit
union (annual loan volume totaling
$660 million)
Identify
opportunities
by delving into
the data
15%
ONLY 1 IN 10
purchase applications
filed were closing
24
First-time homebuyer
focus group findings:
NO TIME
for 2-hour
seminars
It’s not
just about
TECHNOLOGY
Eliminate the “BLACK HOLE”
of uncertainty during processing
Find out
what members want
— and deliver
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ALTRA
R E S P O N D E D TO
THIS
F E E D B A C K B Y:
Introducing “Homebuyer
After 5” open houses
and developing short
YouTube videos on the
mortgage process.
Implementing periodic
updates for borrowers
from application
to closing.
26
SOMETHING FOR EVERYONE
First-Time Homebuyers Program
Retire Your Mortgage (marketed to retirees)
• 97% LTV on a 30-year term
• Potential for lender-paid mortgage insurance
• No closing costs
• Term of 20 years or less
• No closing costs
• Premium rate to recognize low credit risk
27
2. BUILD
REFERRAL
RELATIONSHIPS
Establish connections
in the real estate community.
Maintain a high profile.
Deliver on your promise
of reliability, prompt closing,
and mortgage expertise.
28
E S TA B L I S H C O N N E C T I O N S
I N T H E R E A L E S TAT E C O M M U N I T Y
“ In many ways, doing business with a strong credit
union helps legitimize their referral relationship
and provides a safe place for their clients to
receive an honest lending option.
”
ANDREW SPIRRISON
V P / R E T A I L D E L I V E R Y, F O R U M C R E D I T U N I O N
Result: Referrals that account for 32% of closed loans, most of those with new members
29
M A I N TA I N A
HIGH PROFILE
FORUM is a sponsor of the Indianapolis
Home Show and Historic Home Tour.
FAIRWINDS is a prime partner of the
Orlando Regional Realtor Association.
Altra’s mortgage loan officers are
expected to develop a “sphere of
influence” with local realty and
homebuilders’ associations and
business and community organizations.
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DELIVER ON
YOUR PROMISE…
…OF RELIABILITY
Realtors and home
builders refer clients
to lenders that offer
options for
borrowers of varied
circumstances.
…FOR PROMPT
CLOSINGS
…OF MORTGAGE
EXPERTISE
Home buyers and
Realtors count on
lenders to close on
schedule.
Nothing builds
confidence like
handling a complex
transaction efficiently
and effectively.
31
D E L I V E R O N YO U R P R O M I S E
“
All it takes is one or two of those situations where a realtor
couldn’t find anyone else who would take a chance with
their buyer. If you can do a couple of these, you’ve got a
realtor who thinks you can do just about anything.
”
K E V I N S T R A N G M A N, A L T R A F E D E R A L C R E D I T U N I O N
32
TIMELINESS
TOPS THE LIST
FAIRWINDS CU offers a $1,000
guarantee to close on time
and has paid out only once.
This guarantee wins over
homebuyers — and their realtors.
33
BE THERE ON
T H E B I G DAY
Altra mortgage loan
officers attend closings
as a venue for positive
interactions with members
and realtors.
34
DON’T FORGET
MEMBER REFERRALS
In surveys after their mortgage closes, many Altra
members says they chose the credit union as their home
lender based on recommendations from friends and
family. With a Net Promotor Score over 80, Altra relies
on its members’ strong affinity for mortgage referrals.
35
3. STRUCTURE YOUR MORTGAGE
DEPARTMENT FOR SUCCESS
FAIRWINDS' APPROACH
STAFFING
Expand the
number
of mortgage
loan officers
BASE OF
OPERATIONS
PAY
STRUCTURE
SYSTEM
SUPPORT
Centralize
mortgage
operations
Incentivize
for expanding
purchase
loan volume
Gear up
for higher
volume/better
service/lower
efficiency ratio
36
FAIRWINDS' APPROACH
STAFFING UP
11
LOAN
OFFICERS
now handling
mortgage lending
referrals from 36
service centers
1
EXTERNAL
LOAN OFFICER
(no branch
affiliation
or internal
referrals)
4
CALL CENTER
OFFICERS
in dedicated mortgage
call center, averaging
$2 million per month
per staffer
Supporting a sale culture
37
FAIRWINDS' APPROACH
CENTRALIZING
O P E R AT I O N S
Previous model of mortgage lending
spread across branches was inefficient
and ineffective (high rate of applications
that never closed).
Centralizing mortgage applications,
processing, and underwriting solved
the “cart before the horse” dilemma,
quickly increasing volume to cover
expansion costs.
Also moved single officer doing mortgages
in consumer call center to dedicated
mortgage call center, where volume
increased to now keep 4 loan officers busy.
38
FAIRWINDS' APPROACH
PAY
S T RU C T U R E
Internal loan officers’ salaries
based on salary, dollar and unit
volume, and member service
$
$
External loan officer paid on
commission to build business
$
Per-loan bonuses reflect
strategic goals: highest bonus for
purchase loans from new
members (30% of volume);
lowest for existing member
existing loan refi
39
FAIRWINDS' APPROACH
SYSTEM
S U P P O RT
Dedicated data analyst and
systems administrator keep info
flowing and automated lending
powered up.
Mortgage systems designed to
keep pace with growing volume
and still close loans on time.
Member service key:
System generates emails
to keep borrowers informed
on loan progress to closing.
40
WIN
EXECUTIVE
TEAM
A N D B OA R D
SUPPORT
Make a strong
case for investing
in mortgage
infrastructure
41
KEY METRICS
TO S U P P O RT
YO U R CA S E A N D
M O N I TO R
PERFORMANCE
Total loans to members / amount / volume
Credit quality ratio
New loan originations
Delinquency / charge-off
Mortgages originated / sold / services
retained
ROA generated by mortgages
Market share
Member satisfaction surveys and Net
Promoter Score
42
4. DELIVER EXCEPTIONAL
MEMBER SERVICE
W H AT
M AT T E R S
M O S T TO
M O RT G AG E
B O R ROW E R S :
Introduction to the home-buying
process and support for first-timers
Expert guidance in choosing
the right loan for them and
understanding a complex process
Closing on time and keeping
members informed along the way
43
44
EXPERT
G U I DA N C E
Whether it’s their first
home or their seventh,
homebuyers appreciate
guidance in sorting
through the mortgage
terms that will best
suit their financial
circumstances.
45
ON THE CLOCK
“ We continue to deliver great service by
meeting closing deadlines in a very busy market.
Currently we are averaging a score of 9.5
(out of 10) on closed loan surveys.
”
ANDREW SPIRRISON
FORUM CREDIT UNION
46
5. BUILD ON THE MORTGAGE CONNECTION
If you build a relationship with members based on their mortgage,
will they come back for more?
47
CROSS -SELLING
OPPORTUNITIES
Checking account with debit card,
direct deposit, e-statements, and
automatic mortgage payments
Home equity loans and
lines of credit
Auto loans and refinances
Credit cards
Insurance: property & casualty,
credit life & disability, involuntary
unemployment
48
ALL IN THE
TIMING
Build insurance offers into
the mortgage process to save
members time in shopping
for required coverages and
helpful protections.
Loan offers come after
the mortgage closing.
Structure an onboarding
program with regular follow-ups
to welcome new members.
49
47% of Americans say they
could not come up with
$400 if an
emergency
occurred
$
77 MILLION Americans
have a collection in their credit
report; some dating back as
far as 7 years
More than 7 IN 10 say if they lost their job,
they could go no more than four months
without experiencing severe hardship
Roughly
!
35%
of consumers
with credit files
38 MILLION
Americans households live
paycheck to paycheck
50
44%
of bor rowers would like
to receive inf ormation about insurance
products when they take out mor tgages.
Half never recall receiving an off er.
51
CO NCLU SION: MA INTAINING
MORTGAGE MOMENTUM
1. Know Your Members, Know Your Market
2. Build Referral Relationships
3. Structure Your Mortgage
Department for Success
4. Deliver Exceptional Member Service
5. Build on the Mortgage Connection
52
ROOM TO GROW
Good News
FAIRWINDS Credit
Union is a Top 8
mortgage lender and
the only communitybased financial
institution on that list
in its market area.
The Rest
of the Story
Of the 13,360
mortgage transactions
in its market area in
March, FAIRWINDS
funded 2.17% of them.
Conclusion
Even for the most
successful credit
unions in mortgage
lending, there is
a LOT of opportunity
to increase
mortgage share.
53
BUILD ON RECENT GAINS
“
The economic downturn focused attention on what credit unions can do for
consumers that is different from the big banks. It comes down to the trust
factor: We’re local. They know us. When they have problems, they can come
in knowing we’ll work with them. That has been our opportunity to
differentiate ourselves. Credit unions need to be thinking ahead about
how to share that message and how to keep that momentum going.
”
KEVIN STRANGMAN
ALTRA CREDIT UNION
54
ACKNOWLEDGEMENTS
Special thanks to:
Chrissy Busheme, FAIRWINDS Credit Union
Andrew Spirrison, FORUM Credit Union
Kevin Strangman, Altra Federal Credit Union
for sharing their stories
55
QA
&
56
PRESENTED BY:
CHRIS ARENZ
C H R I S S Y BU S H E M E
Director, Mortgage Payment
Protection
CUNA Mutual Group
[email protected]
608.665.8921
Vice President of Real Estate
FAIRWINDS Credit Union
[email protected]
407.274.6349
57
© CUNA Mutual Group, 2015. All Rights Reserved.
CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and
affiliates. Mortgage Payment Protection is the marketing name for Group Mortgage Protection Insurance which may include Life and Disability
Insurance underwritten by CMFG Life Insurance Company and Involuntary Unemployment Insurance underwritten by CUMIS Insurance Society,
Inc. Life, Disability and/or Involuntary Unemployment are not available in all states.
MPP-1238408.1-0615-0717
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