Trust, Customer Service Drive Lender Performance

MBA (8/1/2008 ) Palaparty, Vijay
Establishing trust and providing good customer service has some lenders, particularly community lenders, feeling optimistic.
“Borrowers are turning to credit unions because of trust,” said Sue Cook, vice president of mortgage lending at Horizon Credit Union, Farmington, Utah. “More borrowers want to talk to someone local, dealing with a company that will keep the mortgage and not sell it three times. We are getting more and more of that. Borrowers want to do business locally with someone they already know and with whom they have a relationship.”

Kelly Florendo, loan originator at Cherry Creek Mortgage, Denver, said more borrowers are also returning to banks—especially borrowers who get referred by other borrowers.

“Previously, you did not see banks offering all of the products available on the market and that is when people were going to brokers so that they could qualify for anything and everything,” Florendo said. “No one wanted to be turned down. But those borrowers are coming back to the banks—the people who now say they should have listened to us the first time.”

“If you treat customers well, you will gain their trust and business,” Cook said.

Florendo expressed confidence about the present and optimism about the future. “If one out of 90 loans foreclose, that means there are still at least 89 good borrowers out there,” he said. “Cherry Creek follows a conservative approach in lending when it comes to appraisals and so forth. Short of losing some loan officers that dealt in the Alt-A market due lack of ability to do stated-income loans, buybacks have been basically zero.”

Adrian Esta, closing manager at Bank of Commerce, Idaho Falls, Idaho, said that while the number of loans closed has declined, the dollar amount has kept business steady. “We are above and beyond where we were last year,” she said. “The largest decline, however, has been in construction loans and stated-income loans.”

Scott Bollar, vice president of lending and underwriting at Beehive Federal Credit Union, Rexburg, Idaho, said his company has also seen the largest negative impact on construction loans. “Last year we had about 100 construction loans on our books, but today we are at about one-third of that,” he said. “However, the purchase market has been strong and we have really gained on that side.”

“One thing we are seeing is the lack of the ability to get second mortgages in place,” Florendo said. “Some lenders refuse to re-subordinate their positions and that’s one of the fights we are having. Some credit unions and banks are saying no to reducing their risk and exposure.”

“We do second mortgages up to 95 percent and if someone wanted to subordinate, I would say yes because I want the whole loan,” Cook said. “I would be taking on the risk and that’s why we would be doing that.”

Cook said credit unions are also attracting borrowers who cannot quality in the secondary market as well. “We are seeing a lot of our member base return to us,” she said.

“When there is strong momentum with new products and ideas, there is a larger swing back the other way too,” Florendo said. “It will take a few years for things to come back to normal in the industry.”