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TH E M R EP O RT | 35 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION Human Touch Still Important to Borrowers Despite increases in digitization, a survey revealed that most buyers aren't prepared to handle all of their mortgage process online. T hough digital mortgage solutions are on the rise, it appears most buyers don't want the entire transaction handled online. According to Fan - nie Mae's recent Mortgage Lender Sentiment Survey, most consumers still want a human touch. The survey, which examined lenders' channel strategies as they relate to consumer preferences, factored in responses from more than 200 senior executives across 190 lending institutions. And ac - cording to most lenders, "borrow- ers still want the human touch in the mortgage process," Fannie Mae reported. According to the survey, 90 percent of consumers say they want person-to-person communication— either face-to-face, on the phone or via email—with their mortgage lenders. About 42 percent of them use the phone most often, while 35 percent use email, lenders say. According to lenders, only about 13 percent prefer face-to-face interac - tions at a branch or office. The survey shows most lenders are offering customer service via a mix of these channels, with 90 percent using the phone for inter - acting with customers, 88 percent using email, 80 percent using their local branch or office, and 74 percent using their company web - site. A smaller fraction—mostly larger institutions—are using social media and mobile apps. "Overall, most lenders believe their organization's omni-channel customer service is quite strong," Fannie Mae reported. "Lenders emphasize customer centricity, person-to-person interaction when possible, and quick response time as best practices, but cite challenges with systems integration, adopting new technologies, and costs." In the future, lenders plan to expand digital efforts while still focusing on person-to-person communication. However, 40 per - cent of lenders believe P2P com- munication will be less important down the line. "Few lenders feel strongly about the future role of person-to-person communications (phone and in-person)," Fannie Mae reported. "Nearly 40 percent think it will be less important in the foresee - able future. In comparison, recent mortgage borrowers show a strong preference for person-to- person communication—almost all would like to use phone or in-person communication in the future." Credit Unions Tighten Mortgage Lending Standards The NAFCU released data on five key areas of credit union growth, focusing on trends for the year ahead and legislative hurdles. I n November, the National As- sociation of Federally-Insured Credit Unions (NAFCU) released its "2017 Report on Credit Unions," which looks at five keys areas: credit union trends, credit unions' service to their mem - bers and the use of Federal Reserve services, legislative issues facing credit unions, regulatory issues facing credit unions, and emerging challenges facing credit unions. The report is based on NAFCU's Federal Reserve meet - ing Survey and data collected by the organization's Economic & CU Monitor, CU Industry Trends Report, and a 2017 study titled "Economic Benefits of the Credit Union Tax Exemption to Consumers, Businesses, and the U.S. Economy." According to the report, credit unions have had a considerably lower failure rate since the Great Recession at 174 union failures compared to 520 bank failures. However, credit unions still face an uphill path. Smaller credit unions struggle to compete and the report found that the total number of credit unions declines at around one per day, mainly because of consolida - tion. However, regulations are the biggest challenge that credit unions face, mostly because of Federal Reserve compliance. Finally, cybersecurity is always an issue, with breaches costing the industry $362,000 annually. In the face of all challenges along with the Great Recession, the credit union industry man - aged to have a delinquency ratio of 0.75 percent compared to 1.23 percent for banks and 0.94 percent for community banks. According to the report, credit unions contributed $16 billion to the economy annually. The growth/challenge dynamic in the credit union industry is no more readily apparent than in the arena of mortgage loans. The report found that lending standards were almost unanimously loosened in 2016 with one outlier—Non-QM Jumbo loans—while the direct op - posite happened in 2017—all lending standards were tightened with the exception of GSE-eligible loans. This indicates that the industry performed well in 2016 for the most part while it has had a rougher 2017, thanks to a Consumer Financial Protection Bureau (CFPB) rule that imposes a "safe harbor" protection to prime loans that meet the re - quirements for a qualified mortgage. As further evidence of effects of added regulation, a survey con- ducted by the NAFCU indicated that 40 percent of respondents ceased to originate non-qualified mortgages while a further 17 percent additionally reduced origi - nations of non-qualified mortgages (2017 Report). While the survey numbers confirm the report sta- tistics, there is lingering concern in the NAFCU that tightened lending standards will deter quali- fied borrowers. What this will possibly lead to is a change in the definition of a qualified mortgage. Overall, the 2016 loosening of mortgage lending standards and the 2017 tightening are perfect examples of the way the industry can thrive and face adversity because of regulations. It is an industry that is always changing, and a change to the 2017 CFPB rule could very well cause NAFCU members to loosen their lending standards once again. "Overall, most lenders believe their organization's omni-channel customer service is quite strong."

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