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Credit Unions Join the Fray In Mortgage Lending

Credit unions hope to join the highly competitive mortgage loan market. Although mortgage rates offered by these credit unions are not that inviting, they are aggressively campaigning their flexible terms and lower fees. In fact, some credit unions now offer loose membership rules that allow loans for people working for non-member labor unions or companies.

According to New York Times, Guy Cecala, publisher of Insider Mortgage Finance, said that credit unions are aggressively rolling out their assets on profitable ventures – lending is just one of them. Interest rates paid to member depositors remain low, and lending these assets to home buyers generates huge profits.

Credit unions would like to give their members an opportunity to own their dream house through first-mortgage lending. Unlike popular financing schemes, credit unions maintain equitable lending policies that support a healthy borrowing condition for both the union and the member. These lending policies likewise promote an advantageous mortgage portfolio for the credit union.

As a result, loans offered by credit unions provide attractive rates for both long-time and new members. Specifically, lower upfront fees minimize the borrowing costs shouldered by each borrower.

This has come out due to the continuing fallout from the credit crisis. Throughout the mid-1990 until mid-2010, first-mortgage terms offered by credit unions only accounted for 2 percent of the overall mortgage market. But in the recent years, credit unions have become more visible in the credit market, owing 4.5 percent of first-mortgage loans granted to borrowers.

Moreover, credit unions benefited from Wall Street’s suspension of its mortgage securitization policy which required investment banks to divert significant part of loans into securities. Credit unions held their loans on their own portfolio instead of selling them.
In the US State of New York, first-time mortgages granted by credit unions have jumped by 15 percent, said Richard Maxstadt of CUC Mortgage Corporation – an organization of credit unions with about 150 members across the New York state. This is a significant number considering the slow growth of the economy.
Although majority of the home loans follow 30-year fixed-rate mortgages, there are credit unions that now offer market specific loans, especially designed for borrowers.

Mortgage lending from credit unions across the country has enjoyed the same trend. In fact, a steady rise in the number of home loans has been obvious even since 2017.