Home Equity Loans Offer Significant Growth Opportunity for Credit Unions | 2020-09-10


Growth is a primary goal of any business, including credit unions.

Growth is a prerequisite for better service because it provides the resources for innovation and improvement. It also prevents competitors from taking market share, which could lead to reduced membership and less resources to be spent on products and services.

A new source of growth

Recently, CUNA Mutual Group reported that the growth of credit unions is slowing down. Credit unions nationwide increased their loan portfolios by 0.5% in June 2020, less than the 0.7% pace recorded in June 2019, in part due to slower growth in new auto loans (- 0.3% vs. 0.1%) and credit card loans (-0.6% vs. 0.6%).

Auto loans remain a very profitable business – used auto loan balances rose 1.4% in June, double the pace of 0.7% recorded in June 2019. Modern technology enables credit unions who take out these loans expand their relationships with new members from car dealerships. But credit unions still need another engine of growth. Fortunately, it is easy to attract new business by adding an additional product: the mortgage.

While there are many types of mortgages, one of the simplest is a home equity loan or a home equity line of credit.

Closer to consumer loans than home loans, the home equity transaction is much simpler than the money purchase transaction, but it provides all the data and insight into the member’s financial situation. Right now this business is easy to win.

Homeowners continue to have access to a considerable amount of equity in their home. According to Harvard’s Joint Center for Housing Studies, aggregate home equity has more than doubled, from $ 7 trillion in 2011 to $ 15.5 trillion in 2018.

Mortgages have additional benefits beyond organic growth, primarily related to the large amount of personal financial data the borrower will share with the credit union in the process. These include:

  • A deeper relationship with the member, especially when the credit union is handling the mortgage.
  • More frequent reasons for contacting and communicating with the member.
  • Higher lifetime value in the member relationship.

Leverage next-generation lending technology

However, to successfully compete in the mortgage and equity market, credit unions must implement lending technology that meets changing consumer expectations, increases the overall efficiency of the mortgage origination process, and maintains the engagement of demand members at close.

Loan origination technology, such as the Origence mortgage platform, created specifically to meet the needs of today’s credit unions, offers key benefits:

  • A redesigned borrower experience from point of sale to closing, achieved by streamlining and automating the entire loan process. This facilitates organic growth by providing a superior experience for members.
  • A more efficient origination process, through intelligent use of automation geared towards reducing cycle times and increasing staff productivity. In turn, increased efficiency reduces the cost of lending and improves pass-through rates.
  • An integrated lead management solution that keeps borrowers on track, increasing the purchase closing rate and debit.

The technology available today has opened up new growth opportunities by replacing the manual steps of the origination process with an automated business solution. This makes real estate finance a fundamental, if not essential, product for achievable growth.

Roger Hull is Product Manager at Origence, a CU Direct brand.

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