A Mortgage Servicing Model for Credit Unions

Although credit unions in the U.S. hold a small share of the total mortgage volume, mortgage lending is an important part of doing business for credit unions of all sizes. Since the pandemic and the lowering of interest rates has no doubt put a squeeze on the mortgage lending business and made it more competitive, credit unions that wish to thrive in this environment must leverage their digital technologies, data, and member services to attract new members, generate loans and continue their growth.

While mortgage lending cycles can be capricious and often periods of steady growth are followed by downturns in the market, this ebb and flow of the mortgage market is natural and means credit unions (CUs) must be flexible and ready for any changes that come their way. 

Many credit unions are positioned to grow their operations by entering or reentering the mortgage lending sphere. After all, a robust mortgage platform helps build franchise value, increases market and wallet share and enhances the credit union’s reputation in meeting the needs of its members. However, doing so presents significant considerations for credit unions with the potential to gain exponential value regardless of market conditions. If they desire a profitable mortgage lending division, credit unions will need to think beyond their traditional methods of managing volume.

Maintaining staff

One of a credit union’s first assets affected by a market turn is staffing, but in today’s mortgage market — even with its emphasis on tech-driven processes — human touch has never been more important. Combining technology with talent enhances serviceability and improves the experience for lenders and borrowers alike.

When credit unions partner with a tech-driven fulfillment provider, they find their internal overhead is not impacted by market fluctuations. A perfect balance between tech and talent exists for lenders of all sizes, but it especially benefits credit unions in modernizing and expanding their ability to serve their neighborhoods without sacrificing control over decision-making or their homegrown roots.

Modern mortgage-fulfillment technology services employ domestic talent to support credit unions through turbulent markets while maintaining human touch as a core value. Combining the speed and accuracy of modern technology with the personal touch and guidance of a loan officer enables credit unions to provide the best of both worlds to their borrowers.

Increasing capabilities, lowering costs

The best way to ensure a profitable mortgage lending division is through a mortgage service model that mirrors market movement. On its surface, staffing up or down depending on market conditions may be the impulse, but it is inherently risky and doesn’t guarantee an increase in profitability.

Many credit unions should consider the benefits of utilizing technology that automates the costly and time-consuming processes associated with compliance and due diligence.

This also extends to the back-office function of vendor management, which is akin to patchwork quilting, sewing together multiple, disparate pieces to function as one. Connecting these important pieces to create a cohesive unit is a monumental task for even the largest of lenders, thus making it all the more difficult (and expensive) for credit unions to achieve.

Credit unions can avail themselves of best-in-class technology while reducing the operational burden of vendor management by leaning on due diligence performed by a fulfillment provider.

Using metrics to understand the mortgage market

It’s also important to understand what a mortgage servicing model consists of and the various tasks that it involves. In today’s market, credit unions that service mortgages must collect payments, remit property insurance and tax premiums from escrow funds, remit principal and interest to investors through loans, and perform loss mitigation activities in the event of delinquent borrowers. 

Getting all the various elements of a mortgage servicing model to flow smoothly and seamlessly can be difficult, which is why it’s so important that credit unions continually analyze their mortgage service model to pinpoint areas that need improvement. One of the best ways to enhance your credit union's mortgage servicing model is by using data and metrics to evaluate the strengths and weaknesses of your platform. Analyzing data can help your CU do the following:

• Compare your loans with what is being offered by competitors.
• Identify risk, product and geographical segments that are affecting share changes.
• Zip-code data analytics can help you understand where most of your loans are coming from and gauge where to focus your attention.
• By analyzing debt-to-income ratios and comparing it to other credit unions, CUs can get a better understanding of their financial health.

The careful analysis of data and metrics is a crucial part of understanding your mortgage servicing model and your member's wants and needs. 

Other ways to improve your mortgage servicing model

Once your credit union has gone deep into the data and has a sound understanding of what you’re doing right and wrong, then you can begin to make adjustments and enhancements to your mortgage servicing model, as well as other aspects of your digital lending and banking platforms.

Listed below are a few of the ways you can improve your mortgage servicing model:

• Retain servicing: Often, credit unions don’t service the loans they originate. This means when the loan is sold, their members end up dealing with a servicer who, more often than not, treats them like a number and not with the personalized attention credit unions are known for. By servicing your own loans and maintaining a personal touch with your borrower, you can create long-term relationships that are rewarding for both parties.
• Find a niche: By evaluating the different loans in your portfolio and their success, you may be able to specialize in a particular niche. For example, if many of your members work in a certain industry or live in a particular community, designing a loan to serve their specific needs could be ideal. Credit unions must stay true to their core tenets of personalized, friendly member service, and loans geared to a particular niche or community are often a way to do so.
• Go digital: If your credit union hasn’t realized that we’re living in a digital age, now is the time to get on board and start enhancing your digital lending and mortgage servicing options. With the right digital core technology, your credit union can bring all your mortgage servicing needs together under one roof, creating a seamless, user-friendly experience for members, while also saving money for your credit union.

A credit union core technology for servicing mortgages

Many credit unions have decided to go with FLEX credit union core provider to meet their mortgage servicing needs. FLEX is a complete mortgage servicing provider and is coupled with full escrow and compliance support. To help you service your member's home loan, download our eBook to learn how.