Mortgage Business at Risk in the Digital Age


By Robert McGarvey

For Credit Union 2.0


Put the new Bank of America 2018 Homebuyers Insight Report high on your reading pile.  And you may find yourself reading it as a contemporary horror story. That’s because the central message of the report is that today technology has become inextricably intertwined with the homebuying process.

The question for a lot of credit unions has to be: can we continue to hold onto any mortgage business?

Steven Boland, head of consumer lending at Bank of America, wrote in the report: “Perhaps the biggest takeaway [in this report] is that NextGen technologies are here today, and their influence will continue to grow. Many buyers report they are already comfortable using technology throughout their homebuying journey, with room for evolution. Over the next decade, many even predict open houses will only be done through virtual reality.”

The future is coming, ready or not.

Credit unions have been gobbling up marketshare in mortgage origination.  Will that last?

In 2005 credit unions had about 1.9% of mortgages.  In 2014 that had grown to 8.3% according to CUNA.

But in recent years the headline in the mortgage business has been the rocketing growth of non banks such as Quicken which now has a bigger share than Bank of America and Wells Fargo.

Non banks in fact now grab five of the top 10 spots in mortgage origination. And Quicken Loans is in 1st place.

What is going on is found in the B of A homebuying report and that is why it is critical reading for credit unions that want to continue to stake a role in first mortgage residential originations.

A number that jumps off the page: 32% of us told B of A we are comfortable applying for a mortgage online.  

Just 20% of us like online dating.  Only 37% are comfortable shopping for groceries online.  

Think on that. Almost as many who are comfortable buying kibble and chickpeas online are comfortable with applying for a mortgage online.

The majority – 52% – of those who are comfortable with applying for a mortgage online are or already have done.

Personally I got a mortgage, via USAA, almost entirely online in 2013. In 2004 I did similar with Countrywide.  The tools exist, they work, and at least to me the online process is more comfortable and faster than doing it in a bank or credit union office.  A bonus is that at home I have all the necessary paperwork on hand. I honestly cannot imagine going through a mortgage application at a remote office.

And more of us are coming to think similarly.

The data goes on.  According to B of A, “92 percent agree that technology makes them feel more in control of their financial decisions. They also see technology playing a role during every stage of the homebuying journey.”

One interesting data point from B of A: 4% of us say we’d make a home purchase offer based only upon an online review of the property.

Surprised it’s that many? I’m surprised it’s that few. In 2004 I sold a home in Tucson to a buyer in Hawaii who had seen the house only online. She made a full price offer.  She did want a contingency where she could pull out at closing if the house had been presented deceptively. I knew it hadn’t been, I consented, and at closing she did the deal.

Expect more changes. According to B of A, in the next 10 years 55% of us expect the mortgage process to be paperless.   I’m surprised that isn’t 90%.

53% expect the process can be completed within a few days.  Note: some lenders already promise same day approvals and that will become the new norm. Some promise approval in minutes.  

6% of us expect appraisals to be done by drones in the next 10 years.  Count me in the 6%, at least for production houses and condos. Already many appraisals are drive-bys.  A drone is just an extension of that trend.

What’s the lesson to learn from these many data points? The main one is: go digital. Make sure your credit union has an online application process that works. Really. Honestly. Ideally, both in a mobile app and online – but definitely online.

Lack of a good online mortgage app is becoming a deal breaker for many.

How good is yours? Get a half dozen friends – not credit union employees – to go through the online process. Gather their feedback. Did any quit in exasperation?  How many made it to the finish line? How long did it take them. (And do cancel out all the apps before the process moves to the next stages or you will lose friends.)

Don’t be shocked if there are loud grumbles about your online mortgage processes.  That may be the credit union norm. But it’s not good enough. Not today. Definitely not tomorrow.

We are coming to a time, very soon, when most mortgage applicants will expect to do this online, just as the vast majority of credit card customers expect.

That is tomorrow’s reality.  Get ready for it today.


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