Beware in 2012 of some sneaky moves aimed at your potential borrowers.
What's happening is the result of the fact that applying for a loan isn't what it used to be. Approvals have become more challenging and lenders who remain in the arena are ready to pounce on the next possible borrower. The big guys aren't leaving a stone unturned either. As they have big budgets to spend in retrieving any possible loan they can find, they are purchasing leads from credit reporting agencies looking to deliberately redirect your members right from under your noses.
What is it and how does it work? Anyone in marketing has either participated or heard of purchasing leads. It's a pretty easy process and there are more list suppliers out there ready to sell you leads than you can imagine. It's not at all illegal, although privacy is definitely a concern for members, and hence why so many people choose credit unions to do business with as they know information is not sold. However, the credit reporting agencies are willingly selling the names of potential borrowers who have pulled their credit report and that's the way the big guys are soliciting your member's loans.
As your member applies for a loan, their credit report is pulled during the process. The credit report agency will then compile a list of all inquiries of credit reports for home loans. They then make these lists available for purchase to anyone who will buy them and then the purchaser solicits the potential borrower.
It's a sneaky move that misleads the borrower who has begun the loan process with your credit union with a phone call or e-mail to perhaps look at other options with other institutions that will not be in the best interest of the member.
Here's a sample e-mail that one member received:
My name is John Doe and I work for ABC Bank here in Anytown, USA. I just recently received your online mortgage application and wanted to give you several refinance options for you to consider. I can currently offer the following options for your refinance:
3.875% fixed for 30 years with $2400 of total closing costs
4.00% fixed for 30 years with $1400 of total closing costs
4.125% fixed for 30 years with only $400 of total closing costs
4.25% fixed for 30 years with absolutely NO closing costs
Please let me know if you have any questions/concerns regarding my above proposals. I hope you're having a great day so far and I look forward to hearing from you soon.
John Doe, Loan Officer
ABC Bank, Anytown, USA
This practice has the potential to damage a CU's service reputation because the member decides that someone else is offering them something the credit union can't or the member gets confused and responds without realizing it isn't the credit union. In many cases, these "lower rates or closing costs" are hiding fees the member is unaware of and therefore not the best loan option.
What can you do to help your member avoid this confusion? Credit unions need to inform their members to be aware of possible outside solicitation as they undergo the loan process. Communication is key. The member needs to know with whom they are working and that while the credit union is there for the best interest of the member, other financial institutions aren't. Make the member cautious and perhaps a little bit leery of other lenders who might be out to supposedly "help" them.
These solicitations can obviously have a negative impact on the credit union if members are misled into thinking they are in fact talking with your credit union. Communicate with your members to protect them from other lenders who might solicit them with loans or other financial products not in their best interest.
Matthew Abbink is VP of Direct Lending with CU Members Mortgage. He can be reached at Matthewa@homeloancu.com.