Innovation Comes to Gen Y Mortgage Lending
by: Robert Christiansen, District Manager I, Servus Credit Union & The Cooperative Trust
How might credit unions increase the availability of affordable home ownership in North America? The Cooperative Trust (formerly The Crash Network) put this challenge to the credit union system in May of 2011 via their inaugural innovation tournament The Collider. I responded with Honeycomb (formerly CU Home Buyers Plan), a prototypical financial product tailored to first-time homebuyers. After a few rounds of tough love from the judging panel, Honeycomb emerged as the successful product.
In an age of low interest rates and lower financial literacy, first-time homeowners face an uphill battle in saving for that first big down payment. A 2009 Filene study found that two thirds of four-year students graduated with substantial student loan debt. This is a separate (and additional) animal to the four or more credit cards that they’re also graduating with in their wallets. With bills barely getting paid, having a substantial down payment for a first home is an unrealistic dream.
Left to their own devices, young people are growing up largely unaware that they have financial problems. The good news is that our younger credit union members are not only using family and friends for financial advice, but are looking to professional resources as well. Seeing results from a study Cisco Internet Business Solutions Group published last year, I wanted to create a product, rooted in financial literacy and socially integrated.
The goal was to design a product to pull young people from the mire of electronic ad space and redirect them to a truly useful online financial tool. The product needed to appeal to the twenty-something’s sense of the organic. It needed to be interesting enough to make a potential customer want to have a look, and accessible enough to prevent him from fleeing in exasperation back to ING Direct. And… we wanted to find a way for credit unions to help their young members grow their money. After many returns to the drawing board, with the help of a Filene Research Institute Implementation Team, we have created such a product, Honeycomb, which comprises two unique elements for the first time home buyer:
- matched savings for a down payment and/or closing costs
- required in-branch contributions promoting financial check-ins with the member
Honeycomb is coming to life and will soon be looking for credit unions to pilot the idea. To learn more about Honeycomb or to express interest in participating in the pilot, go here!
Robert Christiansen has worked with Servus Credit Union for the past 10 years in a variety of retail banking roles. He was the inaugural winner of The Collider innovation tournament with his entry Honeycomb. Robert sits on the Credit Union Central of Canada National Young Leaders Committee and is the current vice-chair of the Servus Young Leaders Network. www.servus.ca www.trust.coop
