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Winning Your Members’ Mortgage Loans in the 2023 Purchase Market will Take Greater Effort. Here’s how.

By Chris Perry MGIC

Mortgage interest rates have more than doubled since the start of 2022, causing the “refinance phone” to stop ringing. This has also created a situation where too much of credit unions’ loan portfolios are locked in at 30-year-fixed, lowrate mortgages. 2023 rates are forecasted to remain elevated compared to the last few years.

In fact, during our latest economic webinar (Financial and Mortgage Trends, Nov 2022), MGIC’s partner Steve Rick, chief economist at CUNA Mutual Group, noted that it may be 2024 before the economy finds rebalance with the labor market and inflation. According to Rick, while inflation helped increase the credit union growth rate in 2022, rising interest rates will weigh on loan growth for credit unions going forward.

Rick also foresees a 5% drop in mortgage originations in 2023, coming off a drop of around 40% in 2022.

Of course, that doesn’t mean there won’t be mortgage loans out there for credit unions to win. While refinances may not rebound in 2023, some of your members (and potential members) will still take out first mortgages to buy homes regardless of current interest rates.

But winning loans in a purchase money market is far more difficult than in a refinance market. In a refinance market there are no real estate agents, no moving vans, no new owners concerned about the purchase price and home condition. There are no current owners concerned about selling their home and moving. In short, a purchase market has many more moving parts.

There are many techniques and strategies credit unions can use to earn purchase business from their members and from borrowers outside of their membership, which has the added benefit of creating new members. However, leveraging these tactics may require credit unions to reorient their operational, marketing, and sales efforts.

Here is your action plan to earn purcHase business in 2023:

examine your loan officer (lo) sales team and their management, activities, and compensation. The non-credit-union loan officers they compete against are often paid 100 basis points (or 1%) to close a loan. This creates tremendous motivation to develop lead sources, market creative solutions, and close loans. To compete even if they can’t match that level of compensation, credit unions may have to treat their LO staff differently and look for other ways to provide support.

engage members in homebuying education. First-time homebuyers often hold major misconceptions regarding credit, savings, and down payment, all of which provide an opportunity for credit unions to engage with prospective borrowers! Educate your members repeatedly and stay in touch with them to win their loans when they’re ready to buy. Homebuying education topics can include credit use and repair, savings patterns, and debt management.

Focus on pre-approvals and pre-qualifications. Invest in this work and set up a consistent follow-up methodology to win loans when your members are ready to sign a contract. Make sure your offerings are as detailed and committed as your competition. You are competing for these loans long before the contract is signed.

Commit to a real estate agent referral program. Once you have pre-qualified/preapproved your member, the best way to win their final loan is to refer them to an agent with whom you have a relationship. This will increase your closing percentage of the loans you have invested in by threefold.

Cross-sell mortgages. As a credit union, you have ample amounts of data on your members, as well as their trust. There are many touchpoints you have with your member to “sell” your mortgage offerings. Your branch teller position is just one. Does your staff know what signs to look for, what basic questions to ask, what actions they can take to advance a conversation with the member to a loan officer? Are they compensated for taking the initiative?

Evaluate your portfolio product and program design. This is your number one differentiator. Examine your membership’s mortgage needs and design programs that will help them afford the homes they want. Craft products such as intermediate ARMs (5/1, 7/1, 5/5) that will help them achieve a lower, more affordable monthly payment, or allow them to put less money down to buy the home they love.

This list may seem daunting at first but following these action steps can help you continue to earn purchase business in the current market, which will likely last at least a couple of years. Now is a great time to begin the building process.

Chris Perry joined MGIC in 1999 and serves as the VP of sales for the DC, MD and VA marketplaces and as MGIC’s national credit union manager. Chris leads MGIC’s credit union strategy, in which he focuses on branding, product and client development, and partnerships and affiliations.