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Unbeatable Mortgage Rates Drive Credit Union Refinance Boom

Unbeatable Mortgage Rates Drive Credit Union Refinance Boom

Despite a slight increase in mortgage loan rates last week, rock bottom rates provide another record-breaking time to refinance or buy--if you qualify.

The Mortgage Banker’s Association (MBA) reports that U.S. mortgage refinance applications increased to its highest level in three years. The refinance index rose 0.8% from the preceding week to its highest level since April 2009.

As refinances swelled, the new home purchasing index dropped 2% from the week prior. Experts believe that while low rates have prompted the refinance charge, continued tight lending standards may be hampering purchase efforts.

For example, when investment adviser Peter Nagle tried to purchase a condo, he ended up becoming entangled in a two and half month-long ordeal, despite having a strong credit report, a seven-figure income and demonstrating the ability to make a 25% down payment. Nagle reports that the endless slew of document requests wore him down after a while. “It felt like they were trying to figure out if I was a criminal or something,” he told Bloomberg.

Nagle’s wait is similar to what homeowner Scott Thompson experienced when he attempted to refinance his home last December. Thompson owns a successful company with his two brothers, but being a co-owner delayed his efforts when it came to obtaining a mortgage due to his share of the company’s debt being added to his personal debt.

“I am not under water, my credit is good, I have never been late with a payment and I am not looking to take equity out,” Thompson said. "All I want to do is reduce my mortgage payment from $2,450 to $2,150. That’s actually improving my finances.” Bloomberg says that he has since reapplied with a different lender.

When Thompson refinanced, he was hoping to be approved for 4.75% on a 30-year loan. Today, the average rate for a 30-year fixed rate mortgage inched up slightly moving from 3.49% to 3.55%. Rates on a 15-year fixed rate mortgage also increased from 2.80% to 2.83%.

Credit Union Members Report A More Positive Mortgage Experience

While credit unions perform the necessary due diligence before approving a mortgage, mortgage loan stories coming from credit unions are typically more positive than what was conveyed to Bloomberg.

For example, on the Inova Federal Credit Union ($250 million, Elkhart, IN) website, member Marc Mishawaka writes, "It's the only financial institution I use simply because they have always bent over backwards to help me when others wouldn't."

IBM Southeast Employees’ Federal Credit Union ($800 million, Boca Raton, FL) member Michele L. said, “I became a member last year and just recently refinanced my mortgage. The entire experience was quite pleasant. Everyone could not have been more helpful, more personable, more attentive to my needs…..well I could go on and on! I was a former BoA customer who was badly stung by their so called “customer service” in the most appalling manner. I only wish I had come to my credit union sooner. Thank you, thank you, thank you!”

Mani, a member at Verity Credit Union ($399 million, Seattle, WA) was thrilled with the prompt and professional service throughout the loan process. “I want to thank you for the promptness and pro-activeness that you exhibited throughout the loan processing to ensuring we close on time. My real estate agent continued to be surprised when I told him, yes, the underwriting is done ahead of time, yes, the documents have already been sent to escrow ahead of time, and yes, they have already reviewed final docs to ensure there aren't any snags. I appreciate your efforts very much. You know who I will be referring to when it comes to home loans!”

Of course not every member/consumer has a positive experience, as some comments may be derived from frustration levels stemming from overall strict industry conditions or a credit bruised beyond repair. However, while many banks will staunchly refuse a loan request and turn away from the consumer, many credit unions continue to work with the member to help them repair credit and find ways to eventually obtain mortgage loan financing.

For example, at Navy Federal Credit Union ($49 billion, Vienna VA), members have access to a smattering of tools, resources and a personal loan officer to guide and advise them through the process.

“From our perspective, I can read the long stream of letters talking about how the service they received at Navy Federal has made a tremendous difference,” explains Katie Miller, VP Mortgage Products. “We receive a number of letters about refinance experiences that are amazing from our perspective because members talk about how the loan officer changed that person’s life. We know that the type of financing always depends on member’s goals--if they need more cash right now or want to lower their payments, we walk that through that process step by step.”

Unlike Industry Reports, Credit Unions See Mortgage Refinance and Purchase Increases

Perhaps it’s due to an unwavering desire to help every member, but unlike the national average, credit unions are reporting an increase in not only refinance approvals but many also say that their purchase application/approval flow is nearly as strong.

“We’ve found purchases to be extremely interesting because we’ve experienced tremendous growth,” Miller says. “They’re also growing organically--it’s the largest increase we’ve seen since the late 2000 recession.”

Joan Howland, Mortgage Loan Officer at Highmark Federal Credit Union ($87 million, Rapid City SD) says that her credit union is also seeing a decent number of both purchases and refinances. “Although we are seeing a lot of refinances, I’d have to say it’s evenly split between refinances and purchases. Our mortgage loan volume pace has been steady but definitely increased once summer started. As rates dropped our purchase volume increased.”

Both Miller and Howland also report plenty of repeat business. “We have a lot of repeat business and it isn’t uncommon to see the same member that refinanced recently, back again now that rates have dropped,” Miller says.

Howland says that currently Highmark isn’t offering any mortgage specials but members are flocking to the credit union thanks to a wide array of product choices and personal service. “We offer a full range of mortgage products…FHA, VA, South Dakota Housing, so can match up the right product to the member’s needs and will take the time to work with the member to ensure they are in the right product.”

Navy Federal is running a few specials geared specifically to those interested in purchasing a home. “For both purchases and refinances we are running a campaign where we’ll either match or beat any good faith estimate brought to us by a member,” Miller says. “In the event we can’t match or beat it, we’ll give the member $250 after they close their loan with us.”

Additionally, Navy Federal is offering quite a break on mortgage loan closing costs for new home purchases. “For a limited time, we are paying up to $2,500 in closing costs for first mortgages,” Miller adds. She says that along with the credit union’s First Time Homebuyer's Plus offer, members are having a hard time passing up financing through the credit union. First Time Homebuyer Plus provides the option of 100% financing, no application fee and a $200 prepaid loyalty card after closing (Navy Federal’s form of a gift card).

“With rates and home prices being so low, members see this as a ripe opportunity to finally purchase a home and they are heading to a credit union for their financing needs,” adds Cindy Tessier, AVP, Headquarters Mortgage Processing at Navy Federal.

Why are credit unions a better option for mortgage loan financing? Howland explains that regardless of whether the member is refinancing or purchasing a home, she and her team of officers thoroughly examine a number of factors going into the mortgage loan.

“We take the time to answer all the questions and run the numbers to ensure the mortgage loan, amount and overall situation makes complete sense,” she says. “Sometimes the member also needs to see broken down on paper in order to see the big picture and make a more informed decision.”

Howland adds that approvals are not performed in a robotic fashion and that each application is scrutinized as carefully as any other financial institution, however Highmark takes extra steps to find ways to make the member’s dream come true in a logical manner.

Been turned down by a multi-national for a mortgage and want to take advantage of rates while they are still low? Try out Mortgage Calculator to estimate payments and then find a credit union and inquire about first and second mortgage opportunities today.

By Gina Ragusa
Published August 6, 2012
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