1. Lack of product knowledge and the expense of Loan Officer/Processor training
In reality, there’s a practical solution for gaining the experience, training and knowledge needed to broaden your members’ mortgage options—with no additional costs involved. A well-qualified mortgage services provider can deliver the required support and education, along with the majority of fulfillment services. It’s a cost-effective solution for increasing members’ home ownership opportunities and your financial institution’s income.
2. Complex loan origination systems and setup challenges
Again, relying on the advanced technology and systems expertise of a third-party mortgage service provider can be the ideal way to simplify the assumed processing difficulties related to government loans. For example, QRL Financial Services has a technology platform that you can use for free to originate mortgage loans. Your only technology start-up investment is in the time needed for training.
3. False assumption that existing portfolio offerings or high-LTV conventional programs bridge the need for government loan products
The truth is, government mortgage options provide benefits such as lower FICO thresholds and attractive, payment-lowering interest rates that even popular bridge programs (e.g., Freddie Mac’s Home Possible) and high-LTV conventional loan programs may not. For example, FHA loans allow a low minimum 3.5% down payment and offer refinancing available with rate and terms up to 97.75%. USDA loans provide up to 100% financing with as little as 0% down payment for qualified borrowers. VA loans eliminate the
need for Private Mortgage Insurance and are assumable. An expert mortgage service provider can help you navigate and leverage nuances like these to the delight of your members.
4. Members reluctant to utilize government loan products
Consider the largest demographic likely to request a mortgage. Realtor.com predicts that millennials will account for 45% of all home mortgages in 2019, compared to Boomers (17%) and Gen Xers (37%). Realizing that millennials will reach their peak buying power in 2020 upon turning 30, and will likely make up the largest share of home buyers for the next decade, credit unions are wise to target this market segment for expanding their membership and mortgage originations. Why? Millennials may have hefty
student loans and higher debt-to-income ratios. As a result, many are very attracted to the friendlier characteristics of government loans: lower down payments, lower interest rates that diminish monthly payments, and the more flexible underwriting standards that are important for the self employed and members of the growing gig economy. Catering to this group’s preferences—which a mortgage service provider will help you do—can add satisfied lifetime members.
5. Servicing government loans is costly and regulation intensive, increasing the credit union’s risk
Expert mortgage service providers make it their business to ensure regulatory compliance and ethical processing. This is one of the huge benefits of using their services. They meticulously guard against risk of losses due to inexperience and faulty processing. You can also avoid another costly risk factor by making sure you select a reliable mortgage service provider who will not cross-sell their own products to your membership. The best lending partners will protect, rather than encroach on, the credit union’s offerings.