Credit Union Mortgages Prove to Be a Better Choice
By Gina Ragusa Credit Unions Online
In the topsy-turvy world of mortgage lending, many borrowers feel as if they need to hire a team of highly skilled legal consultants before pursuing a mortgage loan.
From unintelligible disclosures to the twists and turns presented during processing, borrowers are approaching the loan process the same way a lion tamer would approach a wild creature-- cautiously prepared for an attack.
After so many borrowers lost their homes in the fiery ashes of sub-prime lending, many prospective homeowners are skittish about mortgage loans in general.
Adding fuel to borrowers concerns are unattainable rates; poor servicing and sometimes being subjected to polices that serve the lender, but not the borrower's needs.
Is there any hope for borrowers who still want a piece of the American dream?
The Credit Union Mortgage Difference
Borrowers seeking calm in the eye of the storm have found refuge in the mortgage loans offered through their credit union.
According to Mark A. Skinner, Manager, Mortgage Origination at IBM Southeast Employees' Federal Credit Union ($700 million, Boca Raton, FL), borrowers have several distinct mortgage advantages when taking the credit union route.
"Service and lower closing costs set the credit union apart from multi-national banks mortgages. We operate nationwide except for Alaska and Hawaii and provide a mortgage hotline, which routes calls to our mortgage team."
He explains that the member is assigned to a mortgage specialist who will help to complete their mortgage needs. Other advantages include:
Published mortgage rates can be locked for 60 days without a fee when most banks quote a 15 or 30 day rates
If rates decrease after the member locks-in their rate, IBM Southeast EFCU offers a float down option to enable members to take advantage of even lower rates up to 10 days before the completion of the loan
IBM Southeast EFCU does not have prepayment penalties on our loans and does not charge origination points like most banks do.
IBM Southeast EFCU is also exempt from intangibles tax, which could save $600 in Georgia and $400 in Florida on a $200,000 loan, he adds.
Like IBM Southeast EFCU, Florida Commerce Credit Union ($299 million, Tallahassee, FL), shares the same intangibles tax advantage.
Mark T. Pease, Mortgage Manager says, "Credit unions have an advantage in Florida as the mortgage is exempt from intangible tax if the credit union closes the loan in their own name. This is a savings of $200.00 on a $100,000.00 mortgage."
Credit Unions Deliver Low Rates, Outstanding Service
Ashley Minshew, Mortgage Lending Manager at Robins Federal Credit Union ($1.4 billion, Warner Robins, GA ) and SVP of Operations, Rod Gruenberg at Community America Credit Union ($1.7 billion, Lenexa, KS ) both say that service, low closing costs and rates are the differentiating factor in their markets.
Gruenberg says, "Community America offers most of the same products that are offered by banks, but with lower origination costs. In addition to the lower origination costs, members get the opportunity to experience the credit union difference in the form of competitive interest rates, low (and sometimes no) fees and even cash back dividends at the end of the year."
"We are different from others in our market due to our relationship with the members," Minshew explains. "Our goal is to serve all of their financial needs from deposit accounts to buying a home. We are a stable, trusted institution in Middle Georgia."
Pease adds that in addition to paper and pen advantages, credit unions in general have been constant in mortgage loan integrity.
"Simple fact, credit unions were not the causes of the housing crisis," he exerts. "The national credit union delinquency is much lower than the national average and credit unions have taken the time to make sure the member actually qualifies for a mortgage. The interest the member pays on their loans pays the credit union employee salary--we are here to help our members succeed. A credit union is not in the business in owning homes but helping our members make sound financial decisions."
Credit Unions Know When To Hold 'Em
Although selling all or a portion of its mortgage portfolio to Fannie or Freddie generates fee income, most credit unions will still retain servicing rights, which makes an enormous difference for the member.
Skinner says that IBM Southeast EFCU retains the servicing on all mortgage loans. "Occasionally, we will sell loans to Fannie Mae but will retain servicing so members maintain the relationship with IBM Southeast EFCU and continue to receive our excellent service levels."
He explains that the benefit of service retention is that members will only have one financial institution to make their mortgage payment and not have to worry about making a payment to another bank if the loan were sold. When members have questions, the credit union has all the records and information to be able research any concerns.
Credit unions like Robins Federal and Community America retain servicing rights to its mortgage portfolio too. Gruenberg says that Community America currently holds 40% of its portfolio but may retain more or less based on market and internal conditions.
Florida Commerce will be retaining servicing rights as well. Pease says, "We are within days of having completed our strategic plan to sell the mortgages and retain the servicing. This will allow our members to make their payments at the credit union even though the loan has been sold."