Many of you probably don’t know this, but I recently cruised off for a long overdue vacation. While I’ll share plenty of stories from my interstellar trip soon, I’m confident it was good to get some life/work balance and come back even more energized about the organization, culture and industry I love so much.
There is something, however, that has me scratching my cranium upon post vacation re-entry. It happened earlier today, March 14. One of my colleagues IMed me with a greeting of “Happy Pi Day!” I was like, “Awesome! Happy Pie Day to you, too! Stop over and I’ll break out the Moon Pies to celebrate. BTW, your computer must have missed that you misspelled ‘pie’.”
He kindly responded with a slight chuckle and let me know that it was indeed Pi Day, as in 3/14 the date equating to pi which is 3.14. I became so confused but must admit the notion of celebrating the mathematical constant whose decimal representation never ends or has a repeating pattern on the date that coincides with its very being is astronomically clever.
Clever but still confusing to this alien. First, they throw that whole Leap Day thing at me (read my post to learn more), and now Pi Day. I leave for a few weeks, and this is what happens. But just as I did with Leap Day, I’m going to embrace Pi Day and what it means to me.
Pi is an extraordinary number that is used in many areas of mathematics, science and engineering, including trigonometry, geometry, calculus and physics. Pi is also important in computer science, where it is used in algorithms for numerical analysis, machine learning and cryptography. As an intergalactic space traveler, I incorporate pi into the engineering of my space craft and mapping of trajectories, for example.
As a credit union mortgage lender, pi represents the importance of a constant in any process. You – the loan originator – and your credit union are the constant in your members’ quest for homeownership and the livelihood of the mortgage through the life of the loan. It also represents a constant numeral, something we DON’T often experience in our line of work (e.g., constant rate changes, interest rate fluctuations, DTI ratios and so on). These inconsistencies may appear on the surface as a negative, but I look at them more as a challenge where we need to improvise, adapt and overcome in order to help more members. I highlighted the importance of this in a previous blog post: Improvise, Adapt, Overcome & Pivot.
I’m obviously more of a user of words versus numbers, but as many an accountant and analyst will remind us, numbers can tell a story. I’m going to take that as an opportunity to tell a short story that will prepare you for today’s market and help more members in 2024. A huge shoutout to Andrew and Dawn for helping pull these numbers together!
Mortgage Market Share: No matter the state of the economy, mortgages will always be an important and vital part of the national economy. Even during a slow year like 2023, the total mortgage origination volume was $1.64 trillion, according to the Mortgage Bankers Association. While that’s a big number, consider that credit unions only closed 7% of those mortgages, compared to 62% by non-depository institutions and 31% by banks. Sure, credit unions have held a steady percentage over the years, but there is still huge opportunities to grow in an industry that is trending upward once again.
Trending Upward, You Say? Yes, we say, or in this case, industry leader Fannie Mae says. According to Fannie’s 2024 predictions, mortgage volume is expected to increase 20% over 2023 numbers with interest rates ending the year below 6 percent. They believe refinance volumes will double from 2023 levels, and existing home sales will rise to 4.5 million units (versus 3.8 million last year). Fannie also anticipates home prices to moderately grow 3.2% as opposed to 2023’s 7.1% price growth.
Member Communications: With the numbers and market expectations on the rise, communication and outreach to potential borrowers must follow suit if we are to help more members with homeownership. To do this successfully with today’s generation of borrowers, we must have a goldfish mentality. That is, since a goldfish has a memory span of about 6-10 seconds, we MUST execute a marketing plan that is consistent and repetitive in its calls to action. An average person needs to see or read a marketing piece 5-6 times before reacting to or remembering the message. Helpful Hint: Education content builds trust and loyalty as well as faster responses from Millennial and Gen Z borrowers.
Costs of Dream Fulfillment: Once you’ve secured your borrowers and are ready to originate the loan, be cognizant of the costs associated with doing so. According to the MBA Performance Report, the cost to originate a single loan in Q3 of 2023 was $11,441. Those expenses are broken down as people expenses (67%), process expenses (19%), infrastructure (9%) and corporate allocation (5%). With these costs, the true opportunity to succeed lies in credit union mortgage lenders finding ways to cut expenses. I’d be remiss if I didn’t suggest a good CUSO partner can assist with that – learn more by Clicking Here.
So, there’s your story for 2024. The market is improving, and borrowers are goldfish, eager to learn more about homeownership. The opportunity is there for credit unions, especially if they can cut expenses, ideally through strategic partnerships. The next chapters can only be created by all of you. Please share how you plan to complete your 2024 story, and even though it is PI Day, be sure to enjoy a piece of PIE and celebrate what is shaping up to be an exciting year in credit union mortgage lending!