Bank Board Letter — May 2015
Dennis Hardiman

Offering mortgage products is critical to a bank’s success; however, the risk, complexity and cost of lending has forced some institutions to exit the business completely. For those leaving Ð and even those that have yet to enter Ð there are also challenges to not offering mortgage products. Consumers expect their banks to provide a full array of financial products and services, including mortgages, and failure to do so means customers will shop elsewhere.

Banks across the nation are now facing a conundrum: offer mortgages and face increased costs and risk, or not offer mortgages and face losing customers. Either option has the potential to cripple a bank.

To better retain customers and remain competitive, Worcester, Mass.-based Commerce Bank knew it must offer mortgage products, and to do so cost effectively and efficiently, outsourcing would be key. The next challenge was choosing the right partner.

Since 1955, Commerce Bank has prided itself on providing outstanding and personalized service to its customers. It was important for the bank to partner with an organization that placed a strong emphasis on customer service, which can often suffer in an outsourced model.

To avoid any dropoff, Commerce honed in on finding a partner that had similar customer-centric values versus processcentric, which focuses on optimizing work flow. In addition, Commerce looked for a partner that focused on emotional connection to better engage with members.

It was also important that the partner did not solicit Commerce’s customers and compete with its other products and services. Many third-party providers are banks that will likely cross-sell their own products during the settlement process, such as auto loans, business accounts or deposit accounts. Instead, Commerce was in search of a partner that was dedicated to strengthening existing customer relationships.

After evaluating potential partners, Commerce Bank selected national lender Embrace Home Loans to offer individuals home financing through Embrace’s Affinity Mortgage Solution, a residential lending program for community banks. Founded in 1983, Newport, R.I.-based Embrace Home Loans is a direct lender for Fannie Mae and Freddie Mac, approved by the Federal Housing Administration and the Veterans Administration, and an issuer for Ginnie Mae.

Branded as Commerce Bank Mortgage Solutions, the Affinity Mortgage Solution is simple, risk-free and profitable. A private labeled, outsourced program offering conventional, FHA, VA and U.S. Department of Agriculture residential mortgages,

Affinity removes all regulatory oversight from Commerce Bank but helps maintain its customer base. Affinity leverages Embrace’s innovative, customer-centric approach to lending. By incorporating both emotional connection and superior service, Commerce continues to serve its customers in a way that aligns with its culture and mission Ð to support the growth and vitality of the communities it serves.

In addition, Embrace manages customer engagement to advance the bank’s brand and provide cross-sell opportunities. When a bank outsources its lending operations to another financial institution, it often merely sends customers to another bank that is already known to the customer. Instead, Commerce partnered with Embrace, which private-labeled its mortgage products, enabling the bank to offer consistent service across all product lines as well as extend its brand through Embrace to communities it might not reach otherwise. This not only helps maintain superior service with existing customers, but also reaches prospective new customers.

Embrace is also capable of cross-selling Commerce Bank’s other products and services, unlike a bank partner that might cross-sell its own. Every action Embrace takes is deliberate and strengthens the bond between Commerce and its customers Ð critical to the $1.9 billion Massachusetts bank.

By partnering with Embrace, Commerce Bank now offers mortgage loan products to new and existing customers throughout Eastern Massachusetts. Whether the borrower is a first-time home buyer, moving out of one home and buying another, buying a vacation home or investing in property, Commerce Bank offers programs and rates for almost all home-buying needs. In addition, the bank offers refinance options to help lower monthly payments, pay off mortgages faster, consolidate bills and get cash out of the equity in the home.

Commerce Bank also has access to Embrace’s QuickCLOSE7 process and its APPROVED to MOVE program, providing even more of an edge over the competition. QuickCLOSE7 can have loans cleared to close in just seven days from application and APPROVED to MOVE completely pre-approves customers before they shop. The application is fully underwritten based on income and credit.

Because the bank now offers mortgage products, not only is it fulfilling its customers’ expectations and doing so with superior service, it’s now in a position to increase profitability and remain competitive among other local institutions and large national banks. Commerce knew that offering mortgages was essential to its success, and by outsourcing, it is now avoiding the conundrum that so many banks currently face.

Dennis F. Hardiman is founder and CEO for Embrace Home Loans, an approved lender for FHA, VA and an approved seller servicer for FNMA, FHLMC and GNMA. For more information, contact Jacqueline Weed at or visit