Are credit unions a good source for a mortgage?

by Steve CookNovember 24, 2015

Not so long ago, consumers turned to their credit unions for smaller loans—auto loans, credit cards, home equity or personal loans.But today, credit unions are the fastest growing source of new mortgages, both purchase loans to buy a home and refinancings.

Even though total mortgage originations declined by more than 50 percent in 2014, credit unions increased their market share by 47 percent to 8.4 percent at the expense of state and federally regulated banks and mortgage finance companies, according to Home Mortgage Disclosure Act (HMDA) data.

“The gain in market share underscores how consumers are increasingly choosing cooperative answers to their financial needs,” says Jon Jeffreys, managing partner of Callahan & Associates. “The overall mortgage pie might be shrinking, but Americans understand the benefits of cooperative financial services and are therefore choosing credit union lenders over banks and others.

Dwight Johnson, chief economist of the California Credit Union League, said credit unions could attain as much as 11 percent of the total mortgage market by the end of 2016. Credit unions were non-existent in mortgages before 2000 and did not suffer nearly as much as other lenders in the defaults following.
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Here’s why more consumers are turning to credit unions for their mortgages:

  • Credit unions shape their offerings to fit their members’ needs.They are specifically chartered to benefit specific membership bases, whatever those bases are. Most credit unions are highly customer-oriented.
  • Most credit union mortgages are not sold to investors and often remain with their credit unions their entire lives.They may feature lower interest rates and greater underwriting flexibility because they don’t have to comply with strict underwriting standards from Fannie Mae or Freddie Mac.
  • In today’s market, where purchase mortgages have overtaken refinancings, credit unions are doing a better job of reaching out to their members and letting them know of their purchase mortgages with fixed and adjustable rate mortgages and first-time buyer programs that don’t need private mortgage insurance and can include the option to borrow an additional $2,000 to help with closing costs.
  • They’re also reaching out to Realtors, who realize that credit unions are a viable option for their clients.

However, there are shortcomings to choosing a credit union.Many smaller credit unions do not have the capitalization of offer mortgages many them to have limited offerings compared to large online lenders and bi g banks that offer a full menu of fixed and adjustable rate loans, FHA and VA,jumbos, non-qualifying and subprime loans and loans whose rates can be locked by the borrower.Also, approval time at a busy credit union may take longer than a traditional lender that specializes in mortgage lending.

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About The Author
Steve Cook
Steve Cook is editor and co-publisher of Real Estate Economy Watch. He is a member of the board of the National Association of Real Estate Editors and writes for several leading Web sites, including Inman News. From 1999 to 2007 he was vice president for public affairs at the National Association of Realtors.