How Narrowing the Market Focus Can Increase Servicing Opportunities

As 2019 approaches, many credit unions may be looking for opportunities to expand their mortgage servicing program to generate more income and grow their business. While increasing the types of loans serviced or borrower markets served may seem like the best approach, it may actually be more lucrative for credit union servicers to narrow their scope by focusing on a specific niche. Identifying a niche that’s a natural fit enables the servicer to excel by better catering to the particular needs of their targeted borrowers rather than spreading their resources across multiple verticals.

Why Specialize In One Niche?

Today’s consumers expect their financial institution to provide personalized service. Staff who are experts in a specific niche can provide personalized service, setting your credit union apart from its competitors.

Many lenders don’t service the loans they originate. Many members choose credit unions for their mortgage needs, expecting to receive personalized service long after the closing of their loan. When their loan is sold, the member may wind up with a different servicer who treats them as another anonymous account number. Instead of receiving personalized service, their support comes from call center staff using scripted responses. By retaining servicing, you can provide exceptional customer service for the entire life of the loan.

By specializing in servicing niches, credit union staff can increase operational efficiency and save money by utilizing resources for a particular area of the business. Those time and cost savings are passed onto the member, improving the member experience. Focusing staff training in a particular area promotes greater comprehension, compliance and customer service quality.  

To identify a niche, start by looking at your credit union’s current service model.

Where Are There Needs For Specialized Loans?

Niches are often defined by loan type. Start by examining the loans in your current portfolio. You may be able to build upon this base. For example, credit union lenders who originate many agricultural loans probably already have a strong understanding of the specific needs and challenges of members who have residential and commercial mortgages secured by farm land.

What Market Should We Serve?

Niches may also be defined by the credit union’s unique member base, resulting in a built-in niche. For example, credit unions might serve borrowers working for a particular company, in a certain industry or living in a particular community. Borrower niches often have a geographical component. A good example could be found in the Select Employee Groups (SEG) many credit unions have added as part of their field of membership.

Narrowing the scope of the borrower market being serviced may reduce the quantity of loans serviced but will often promote higher quality relationships that can lead to cross-selling over time. Credit unions may have multiple touch-points with borrowers who have multiple accounts (e.g., car or personal loans, checking or savings accounts or credit cards). A mortgage loan is viewed as a long-term sticky product, meaning that the borrower will have frequent interaction with their mortgage servicing company for an extended period. This presents a key opportunity to cross-sell other products. By specializing, servicers can create a closer relationship with members and tailor services to their needs. Borrowers who prefer face-to-face interactions may choose local credit unions as their lender, providing them an alternative to online interaction, if the situation warranted a more personalized interaction.

Personalized, comprehensive and friendlier service improves the member experience. Satisfied members are more likely to choose your credit union for their future financial needs.

Are We Passionate About a Particular Cause?

Some servicing niches are philanthropic in nature and are geared toward furthering a certain mission. These niches generally also have a geographic or borrower-focused component as they’re established to serve the needs of a particular community.

For example, a credit union may couple a renovation loan with a rehabilitation loan. Fannie Mae^® offers a product called HomeStyle^® Renovation Mortgage for financing of home improvements in a purchase or re-finance transaction of an existing home. Credit unions that offer this loan product can sell the loans servicing retained.

Some credit unions offer community enhancement loans that provide funding to boost economic development. Community enhancement loans may be used to build affordable housing or new schools or improve infrastructure that benefits the community.

Often, new opportunities in servicing already lie within the credit union’s own walls. Servicers can start by looking at their existing products and successful markets to identify more opportunities to increase servicing revenue and sell other services or products within the company. By settling into their niche, servicers will be able to excel in their operations while providing exceptional member service, positioning them for the utmost business success.

Published in CUNA, January 2019 

Susan Graham is president and chief operating officer of Financial Industry Computer Systems, Inc. (FICS), a mortgage software company specializing in cost-effective, in-house mortgage-origination, residential mortgage-servicing and commercial mortgage-servicing software for mortgage lenders, banks and credit unions. FICS’ software solutions operate on Microsoft^® Windows^® platforms using Microsoft^® .NET Framework and provide customers the flexibility to choose an in-house or cloud hosting solution. The company also provides innovative document management and web-based capabilities in its full suite of products.