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Mortgage Loan Borrowers Flock to Credit Unions Before 2013

Mortgage Loan Borrowers Flock to Credit Unions Before 2013 By Gina Ragusa
Published December 17, 2012
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For the first time in credit union history, the industry will most likely reach $100 billion in originations this year--a new record.

Despite the tepid economic recovery, more borrowers are saying “yes” to a credit union mortgage now more than ever. Navy Federal Credit Union ($51 billion, Vienna VA), one of the country’s largest credit union lenders says the combination of rates plus unbeatable service has driven more consumers to a credit union for their mortgage loan.

“For us the volumes we’ve been seeing is because of the historically low interest rates, also emphasized by the fact that people are looking at their options in financial institutions,” explains Katie Miller, VP/Mortgage products. “Credit unions are great because they are a member owned institution, so the member knows that the credit union has their best interest.”

One contributing factor to the hike in originations is the lackluster service being delivered by banking giants. “We’d be remiss if we didn’t give a shout-out to the major banks for being annoying to consumers and forcing people to seek out other alternatives,” Bob Dorsa, American Credit Union Mortgage Association President tells The New York Times.

Dorsa tells The Times that at the end of the third quarter, the credit union share of mortgage originations totaled about $89 billion nationwide, $7 billion more than in all of 2011.

Recovering Economy and Low Rates Prompt Mortgages

The overall environment has also lightened, providing more opportunities to purchase a home. “It’s a great time for folks to become first time home buyers,” says Tim Mislansky SVP / Chief Lending Officer at Wright-Patt Credit Union, Inc. ($2.5 billion, Fairborn, OH). “Housing values are still at low levels and make them quite affordable. Also, interest rates are at historic lows, allowing first time home buyers to either get more home for their money or have a lower percentage of their income go towards their mortgage payment.”

“With the historically low rates, we’ve seen a pick up in the number of purchases this year,” Miller says. “While we continue to see a lot of refinances, our purchase volume has grown since before the recession.” Miller adds that the current $2,500 closing cost promotion on purchases has enticed more consumers to consider Navy Federal for a mortgage.

Nationwide, reports of a recovering housing market have prompted those who had been sitting on the fence to either purchase or refinance their home. The Detroit Free Press reports that home sales in the metro area have increased by 7% since last year. Local Realtor, Deborah Ronayne says, "Anything decent on the market, within two days there will be just a flurry of showings and multiple offers."

Fannie Mae’s November 2012 National Housing Survey touches on several key indicators of a housing market revival:

  • Approximately 23% of the participants in the survey said that now is a good time to sell.
  • 41% of the respondents believe that mortgage rates will rise.
  • 21% of the participants said that their household income has risen significantly in the past 12 months.
  • A little more than half of the respondents said that it’s easy to get a mortgage.

Find the Right Financial Institution For Your Mortgage

Although a good chunk of the National Housing Survey participants believe that it is “easy” to get a mortgage; lending standards remain rigid.

“For the member who is credit challenged, the big banks are usually an automatic no,” says David Samuelson, Lending Manager at Southern Chautauqua Federal Credit Union ($58 million, Lakewood, NY) “When conditions are right, we have the option to retain the mortgage here and can say yes to a mortgage.”

Samuelson adds that his credit union can offer all or most of the same products that a person could obtain from a big bank like FHA-low down payment mortgages. “Also, the credit union has some ability to affect decisioning for the member who we believe would fall within our parameters.”

Members at Navy Federal also have a bevy of mortgage choices. “In addition to the $2,500 closing cost promotion, we offer 100% financing and do a rate match where we will meet the rate from another financial institution on both purchases and refinances,” Miller says. “Also we offer a free float down on purchases, so if rates change we will re-adjust to lower rate.”

Dana Desarno, Navy Federal’s Lending Spokesperson adds that members have access to a number of educational resources as well. “Our home center has great home buying articles, interactive calculators that you can email to a friend or the lender, videos, tips with a checklist--all great resources when starting the home buying process.”

While loan qualification remains more challenging than it was several years ago, lenders say that members who provide proof of repayment should be awarded a mortgage loan. “As far as qualifying for the loan, it is true that standards are tighter today than over the past few years,” Mislansky says. “But if a borrower has good credit, a good job, and a down payment of at least 3% to 5%, they can enjoy the benefits of home ownership.”

Ready to take the leap to homeownership (or ready to refinance) before the bell tolls midnight on December 31? Find a credit union and inquire about mortgage loan programs.

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