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a wonderful way for "cooperators to cooperate among themseleves" in a true cooperative spirit. away from dog eats dog. kudos to credit unions.
Mortgage loans are typically sold on the secondary market. Auto, personal and "other" loan types are typically kept in-house. The article is not addressing mortgage loans nor, is it referencing just consumer loans. So we won’t go into HARP loans. We’ll focus only on refinancing and saving the borrowers money.
Borrower’s LTV's and debt ratios are looked at in various ways. The numbers vary dramatically from auto to auto and borrower to borrower. Higher LTV's can sometimes pose an issue especially if working on a lower scored borrower based on a credit unions underwriting guidelines. Any underwriter or Lending Manager can determine if an exception can or should be made. But, exceptions are never the rule.
The savings or benefit is accomplished by making sure the rate and payment is lower than the borrowers current lender. Otherwise, there is no benefit to the borrower. As a side note, a majority of borrowers see the tru savings if they have refinanced their loans with the remaining term they currently have. Interest rates are being lowered, as are payments - and the attempt is to not have borrowers stretch out their loan term. Who wants the have a loan payment stretched out another 3-12 months justs to make sure their loan payment is lower?
As an example, going from a payment of $411 to $399 a month and saving the borrower $12.00 a month seems small; but, with a remaining term of 42 months - that's a savings is $144.00 a year and for 42 months, a total of $504.00 in interest that was not paid to that lender for the remaining months in the term! That is how the savings works.
What mid to large sized credit unions are doing is offering better pricing, service and products that fit the borrowers and credit union’s needs - that beat out the competitors. I’m sure smaller credit unions can figure that out and play with the bigger credit unions.
Credit unions win by gaining membership, savings and loan business and most of all member relationships. The members win by having a great financial institution, great service and products, and real people who don't think of them as a number but, who actually care about their financial wellbeing.
Did I mention how awesome credit unions are at helping borrowers save money?
Credit Union Member and Employee
I love the tenor of the article - saving members’ money by providing lower interest cost on home financing is what credit union are all about. In fact vehicle loan, credit card balance and real estate loan refinancing has been a cornerstone of our credit unions lending initiatives for years.
What I am sorry the article did not cover is how are these credit unions providing the refinance dollars to accomplish their goals? Are they selling these loans on the secondary market or are these predominantly portfolio refinances? How are they addressing members with high LTV's due to declining values? Are they pursuing HARP loans? Are they doing loan modification within their own portfolios? Are they doing the 8-12 year low cost refinances which seem so popular these days?
It is a challenge for small & mid-sized credit unions to be players at this game unless they have a combination of secondary market access, excess liquidity, and a very strong ALM knowledge to monitor the effect of putting long term historically low fixed rates in their portfolio.
It is nice that the $500 million to the multi-billion dollar credit unions have the expertise and capacity to do what all credit unions would love to do for their members but in reality the vast majority of credit unions don’t have that luxury. By providing some details about HOW they are doing what they are doing, smaller credit unions can hopefully gleam some useful tactics that may be implementable in their credit union. That information would make this article a real winner!
This article is excellent, but it is also very important that this credit union, specially at peraland location, work more in customer service.We are expecting been received with a smile. Also they need to have knowledge of alternative to help us better how to increase our money and not wait for us to ask. It is important make us feel that our deposit, car loans and personal loans we make thru the credit union are worthed, and not the way around. Customer service is the key to keep us happy. Unfornately I have seen managers and employees that do not have that. As a teacher I am always observing body language and I can tell when people are not happy on what they do, or simply do not like people. Unfortunately,no everybody have the still to work with people. Training will help a lot on that. Ther manager is the one create an environment of happiness, and good communication skill with customer. Is like the teachers in a classroom, we are reponsible for the children to want to come to school every day. Thank you, I hope my message be helpful.
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