Credit Unions Step in to Fill Lending Void

If you’re considering a home mortgage, either to refinance your existing mortgage or to purchase a home, consider a credit union as your lender.

The number of mortgage originations issued from credit unions in the United States in first half of 2014 has climbed 10 percent year-over-year. This has elevated credit unions to having more than 8 percent share of the home loan market – about triple their share prior to the recession – making them a growing option for home buyers looking for financing, according to data from the Credit Union National Association.

CreditUnionCanadaCanadian credit unions also are experience growth in their home mortgage lending. Credit Union Central of Canada, the national trade association of the industry, notes credit unions have about 7% of the residential loan market.

CUNALogoIn June, the 6,557 credit unions in the United States surpassed 100 million members. You still have to be a member of one to get a loan, but many credit unions are tied to employment, trades, religious groups or more broadly to specific communities. Nearly two-thirds of U.S. credit unions offer mortgages.

“We’ve seen a very strong increase in originations over the course of the last several years,” Mike Schenk, vice president of economics and research at CUNA, said.

Mortgages comprise about 41 percent of all U.S. credit union loans compared to 25 percent in 2000. The average loan amount at a credit union is $130,000, and 70 percent of the loans offered are for 30-year fixed-rate mortgages. Many credit unions offer different financing options for members. For example, Pentagon Federal, with 1.3 million members nationwide, introduced a 15/15 adjustable mortgage, where rates reset only once at the midterm mark to reflect the current market rate. Also, the National Institutes of Health Federal CU offers the five-year fixed-rate mortgage, dubbed the “see ya” loan, which allows home owners to refinance and coordinate it to a time of a special event, such as retirement or when the children go to college, in order to end their mortgage payments by that time.

Credit unions don’t typically charge cheaper interest rates, but they “tend not to tack on a bunch of superfluous fees that other lenders seem to love,” the Los Angeles Times noted in a recent article. “And because they are local and member-controlled, they are more likely to consider applicants with a story to tell than some underwriter five states over who is forced to stick to standard guidelines.”