A Credit Union s Guide To Increasing Purchase Mortgage Market Share Through Real Estate Services

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1 A CU Realty Services White Paper 1658 Milwaukee Ave # Chicago, IL ext A Credit Union s Guide To Increasing Purchase Mortgage Market Share Through Real Estate Services December 2011

2 Contents Executive Summary 2 The Mortgage Challenge 3 Why Credit Unions Need a Real Estate Partner 4 CU Realty Services Mortgage Solution 5 Case Studies and Implementation 6 Conclusion 7 Executive Summary Numerous economic indicators are positive for the home purchase market; home prices and interest rates are both at extremely low levels. Credit unions are well positioned to capitalize on these conditions, yet still struggle to capture their share of the purchase mortgage market. One obstacle is a concept known as First Point of Contact. A home buyer s first point of contact has traditionally been the real estate agent. This often works against the credit union because an agent usually directs a buyer to their preferred lender. Therefore, if no relationship between the agent and the credit union exists, the loan and that member usually go to a competitive lender. An effective way for a credit union to overcome this challenge is to create a network of real estate agents that can service member needs while protecting the credit union s mortgage interests. However, this can be time consuming and hard to manage. The most practical way is to partner with a company that specializes in real estate services for credit unions that: Attracts member attention and interests with time- and money-saving opportunities, such as a reduced Realtor commissions. Supports member s basic real estate tasks, such as online home searches. Connects the credit union to a network of accountable, experienced agents. Creates a new seamless mortgage lead channel With these types of services launched, the credit union should be well positioned as its member s first point of contact when they are ready to buy or sell, and should be able to significantly increase their purchase mortgage loan volume as a result. This paper outlines how real estate services work. It explains the benefits to credit unions and members as well as to real estate agents, and includes statistics and case studies. Credit union executives and managers will conclude that they must provide real estate services to improve their purchase mortgage market share, achieve asset and membership growth, and strengthen their position as their members primary financial institution CU Realty Services, LLC White Paper: A Credit Union s Guide To Increasing Page 2 of 8

3 The Mortgage Challenge Each participant in a real estate transaction faces a unique set of challenges, many of which are outlined below. Credit Union (CU) Challenges The CU is typically not the buyer s first point of contact in the mortgage transaction The CU typically does not have strong relationships with real estate agents The CU typically does not have a real estate marketing channel Members typically don t think of the CU as a place that offers mortgage services Members pre-qualified by the CU often end up going to other lenders The CU typically has limited means of saving money for a member on a transaction The member typically chooses a lender before the CU is aware of the need Member Challenges It is difficult to find a good, experienced, trustworthy real estate agent Real estate transactions are expensive and discounts are rarely available Many parties are involved and there is no single point of contact Real estate transactions are extremely time consuming It is hard to have confidence in a buying decision without a trusted advisor Real Estate Agent Challenges Agents spend an inordinate amount of time trying to find qualified leads The cost of obtaining a buyer is extremely high It is hard to differentiate yourself from the multitude of competitive agents Relationships with lenders are informal and inconsistent The quality and consistency of existing referrals is generally poor Clients demand many hours but still may end up using another agent Many of these challenges exist because the agent and the credit union traditionally work in silos. They represent different companies, have separate contracts with the buyer, and they have little opportunity to collaborate. As shown in the graphics, if there is no partnership between the real estate agent and the credit union, the credit union is bypassed in the real estate transaction CU Realty Services, LLC White Paper: A Credit Union s Guide To Increasing Page 3 of 8

4 Why Credit Unions Need a Real Estate Partner In 2010, total assets for credit unions represented approximately 7.1% of the total assets of commercial banks, but credit unions only captured 4-6% of real estate loans. According to the CUNA Forecast, credit union loan balances are only expected to grow by 1% in 2011 and by only 5% in Credit unions that want to grow their mortgage volume can t expect it to happen organically, they are going to have to take proactive steps. For a credit union to compete with banks in the mortgage loan business today, very few tools are available that provide competitive differentiation. A typical home buyer doesn t see much difference between a bank and a credit union s interest rates and mortgage loan services. Things that do make a difference are trust, service and relationships. Credit unions need to look for options that will help them capitalize on these things to win over their members business. A lack of information on home purchase cycles also presents a challenge to credit unions. When a member is looking for a house, the credit union is often out of the loop until it is too late to compete for the mortgage loan. Buyers search for homes online and this often connects them with a real estate agent that recommends his or her own bank or mortgage broker, even if the buyer is a member of a credit union. If the credit union was affiliated with a large pool of real estate agents, they could create a real estate marketing channel and build a pipeline of loan leads from within their own membership. Why Real Estate Agents Need Credit Unions Real estate agents typically spend around 50% of their time finding qualified leads. This is an extremely expensive and time consuming process, and a source of great frustration for the agents. They spend time and money on advertisements, newsletters, referral fees, reductions in commissions, and employ any number of other marketing tools and techniques. They are often inundated by leads that don t develop into sales, costing the agents additional time and money. The high cost and low conversion rate of leads shows that real estate agents go to great lengths to get their clients, and would value any opportunity to have high-quality, pre-qualified leads delivered to them. Credit unions that provide such leads to the agent will win the agent s loyalty, insuring that those members will be sent back to the credit union for their mortgage CU Realty Services, LLC White Paper: A Credit Union s Guide To Increasing Page 4 of 8

5 CU Realty Services Mortgage Advantage Solution A proven program for increasing a credit union s purchase mortgage market share is the CU Realty Services Mortgage Advantage program. For a small up-front and monthly fee, a credit union can be repositioned as the first point of contact in the home buying process. This effectively moves control of the transaction from the real estate agent to the credit union, allowing the credit union to secure its members mortgage loan business. CU Realty Services CUSO in business since 2001 Over 100+ Credit Unions serviced In 19 states and 49 metro areas Saved members over $10 million 400+ Agent Network Program Components Agent Network CU Realty Services works with a credit union to develop a trusted network of experienced real estate agents who will assist members with buying and selling their homes. These agents will also help secure the members mortgage loan business for the credit union. Marketing Channel The program allows credit unions to create a marketing channel to capture member interest before they get to real estate agents outside the CU Realty network of Approved Agents. Numerous marketing tools are available including best practices, training and promotional webinars, and ready-to-use templates for print and online marketing pieces. Online Reporting CU Realty s real-time reporting tools provide an easy way for a credit union to know details about a member s buying/selling process. Track when a member registered, their buying/selling timeframe, if they have an agent and if they are pre-qualified. Also track how they heard about the program, who registered or referred them, which agent they are working with, and what percent of members used the credit union for the loan. Financial Incentives - Savings are awarded to buyers and sellers who use an Approved Agent in the CU Realty network. Sellers receive a discount on the agent s commission at closing. Buyers receive a credit or check after closing. There are also incentives for credit union employees that help build internal advocates for the program. Realtor Relations The CU Realty agent liaison uses strict criteria and in-depth interviews to select and qualify each agent. Any agents the credit union already has a great relationship with can also be included in the program. The CU Realty member service representatives carefully monitor the transaction to ensure member satisfaction. Sales Training CU Realty trains credit union staff and Approved Agents on the program mechanics including marketing tools and resources, financial incentives, online reporting and best practices. They will also help integrate the program into the credit union s website and in-branch activities, allowing loan officers to cross-sell real estate services. Buyer/Seller Services The Realty Services Program provides members with access to the MLS home database, including area property values, demographic data and statistics. Members have direct access to three critical contacts: 1) Approved real estate agent; 2) CU Realty Member Services Team; and 3) Credit union mortgage loan officer. Awareness Creation CU Realty helps credit unions generate exposure to their realty services through several unique actions. This includes home buying seminars, Realtor On Duty events at credit union branches, and through traditional advertising via statement stuffers and newsletters. Templates are available for production of sales and marketing tools. Pillars of Success CU Realty helps credit unions generate success by replicating the actions of high performers in the program. The training program focuses on three tenants that have proven successful in the past: 1) Employee advocacy; 2) Member awareness; and 3) Realtor relations CU Realty Services, LLC White Paper: A Credit Union s Guide To Increasing Page 5 of 8

6 Member Benefits Significant discounts on real estate agent commissions Discounts can be used to: - Reduce commission costs - Apply towards closing costs - Receive as cash after closing Referrals to experienced and trusted real estate agents Improved confidence by using your own credit union s real estate services Access to MLS and other market and demographic data Access to CU Realty s Member Service Team for assistance Credit Union Benefits Increase purchase mortgages by up to 40% Become first point of contact Agents compete for the credit union s business Enhance member loyalty Differentiate your services Increase value to members Increase competitiveness against banks Opportunities to cross-sell other services Create a real estate marketing channel Establish a purchase money strategy Become members primary financial institution Realtor Benefits Receive pre-qualified leads 40% of these leads become a transaction Reduce the cost of client acquisition Minimize the time spent trying to find new business Gain access to credit union members Be unique among other local real estate agents Build a strong relationship with the credit union Gain instant credibility with buyers 2011 CU Realty Services, LLC White Paper: A Credit Union s Guide To Increasing Page 6 of 8

7 Case Studies Effective Implementation Northwest Federal Credit Union Profile Location: Virginia Members: 90,000+ Partner since 2005 Results: 4,000+ registrations, 2,000+ agent referrals 73 buy closings, 501 mortgages, 70% lending rate Keys to Success Includes real estate services in every marketing vehicle Conducted 42 home buying/selling seminars in 2010 Conducts weekly realtor on duty activities Tower Federal Credit Union Profile Location: Maryland Members: 100,000+ Partner since 2005 Results: Retains 70-80% of their purchase mortgage & title business Gets new business referred in by agents regularly Keys to Success Partnered with CURS to increase mortgage business Knew agent relationships would be the key to success Nurtures agent relationships on weekly/ monthly basis Program Qualification Before a credit union subscribes to a real estate services program, it is important to evaluate the organization s readiness. These questions have proven to be effective qualifiers: 1) Are you actively seeking ways to increase your purchase mortgage market share? 2) Is your culture adaptable enough to incorporate real estate agents into your internal employee activities? 3) Is your executive team on board and willing to leverage the program with levels of accountability? 4) Will you commit to doing monthly outbound marketing to your members? Three Pillars of Success After a credit union subscribes to a mortgage services program, successful performance depends on the following three tenants: 1) Employee Advocacy 2) Member Awareness 3) Realtor Relations Wright-Patt Credit Union Profile Location: Ohio Members: 180,000+ Partner since 2004 Results: Increased agent referrals by 30% Increased number of closings by 25% Keys to Success Installed referral goals for loan originators Accountable for referring 25% of transactions into program Reviewed monthly and during annual performance reviews Prioritized the program into the forefront of their minds Program Marketing Tools Realtor day at the branch Rebate calculator Home buying seminar template Employee ambassadors Instant online agent referrals Agent liaison expert Brochures, mailers Webinars and online demo s Presentations, videos Templates for marketing pieces 2011 CU Realty Services, LLC White Paper: A Credit Union s Guide To Increasing Page 7 of 8

8 Conclusion For over a decade, the CU Realty Services has proven itself effective in accomplishing the following: For Credit Unions: Increased purchase mortgage volume by up to 40% For Members: Delivered over $10,000,000 in rebates For Agents: Provided thousands of qualified leads (1,200+ agents now on the waiting list) Building a trusted Realtor network and putting value in the pockets of credit union members is an excellent formula for increasing purchase mortgage market share. With the proper level of commitment from credit union executives, managers and employees, and dedicated marketing effort to create member awareness, the program is sure to grow mortgage volume. With access to a trusted agent network, credit unions can now create a real estate marketing channel and become the first point of contact for their members that are seeking real estate services. The leads generated for the partner agents are highly qualified, with 40% becoming a transaction. Program evaluation has shown that 80% of credit union members who enroll in the program have not yet talked to a real estate agent. Since 81% of Internet buyers stay with the first agent they meet, this is a powerful result that explains why program subscribers close the majority of their mortgage leads. Credit unions that become a real estate services provider have an immediate and excellent opportunity to capture a larger share of the purchase mortgage loan market. Program Participation Credit unions that are interested in participating in the CU Realty Services Mortgage Solution go through the following sequence: 1) Evaluate the program costs and benefits 2) Execute the program contracts 3) Establish a program timeline 4) Plan the program implementation 5) Launch the program Next Steps Contact CU Realty Services for more information by calling You can also visit our website at to read more in-depth case studies, register for our next Webinar, as well as access news releases and informative videos. CU Realty Services 1658 Milwaukee Ave # , Chicago, IL ext CU Realty Services, LLC White Paper: A Credit Union s Guide To Increasing Page 8 of 8