NEW YORK (9/26/14)--The Wall Street Journal Online considers credit unions small players in the overall mortgage market, but notes they have increased their market share considerably the past decade--to 10% from 3%--to even include jumbo home loans.
That is a surprise, given the credit crisis in 2008, Guy Cecala, CEO and publisher of Inside Mortgage Finance, told the Journal Wednesday (The Wall Street Journal Online Sept. 24).
The Journal reported on jumbo loans offered by four credit unions, urging consumers looking for such loans not to "forget the little guys." It noted that members "may even get better loan terms than they might get from a bank or other lender. To stay competitive, credit unions may waive down-payment and mortgage-insurance requirements." However, because credit unions have smaller holdings than banks, they may limit the amount borrowed.
Bethpage (N.Y.) FCU, with assets of $5.5 billion, offers New York's Long Island residents an interest-only mortgage targeted at jumbo borrowers. Michele Dean, senior vice president of lending, told the Journal that interest-only loans have been popular with wealthier borrowers: the loans have low monthly payments, which means those members can keep other assets in higher-yield investments.
However, member borrowers in this range must have a stellar credit score, with a minimum 43% debt-to-income ratio and a 20% down payment, the credit union said.
The Department of Commerce FCU (DOCFCU), with $339 million assets in Washington, D.C., told the Journal that jumbo mortgages enable the credit union to build relationships with its members. It is then easier to offer a Visa card, a refinance on a car loan, or a home equity line of credit, Jeff Banyas, vice president of lending, said in the article.
How does DOCFCU compete with the much larger banks and larger credit unions in the field? Banyas said it checks rates of eight other lenders and tries to price its jumbo loans at one-eighth of a percentage point lower.
The Journal advised jumbo borrowers considering a credit union loan that they must be a member of the credit union and that credit unions' not-for-profit nature means they might not charge some fees, such as origination and processing fees. Cecala also said long-term 30-year, fixed-rate loans are more risky than adjustable-rate mortgages for the financial institution and may be harder to find at credit unions.