Whether helping to launch a home-based business or fund a college education, credit unions have improved the financial well-being of countless Americans by providing access to low-cost credit. Offering affordable home loans simply carries on the tradition of people helping people. However, in a rising interest-rate environment and a tightening housing market, are home mortgages still a good book of business?
The answer is – absolutely! What we're seeing now isn't so much a bursting of the housing bubble as it is a move toward a normal housing market. In June, the Joint Center for Housing Studies of Harvard University published The State of the Nation's Housing 2006 , which reports that even with the current cooldown, the long-term outlook for housing is upbeat. “Over the longer term, household growth is expected to accelerate from about 12.6 million over the past ten years to 14.6 million over the next ten,” the report said.
In its latest National Housing Survey, Fannie Mae saw a recurring theme: Americans of all ages, incomes and ethnicities believe deeply in homeownership and will go to great lengths to achieve it. But there are barriers , which Fannie calls critical gaps.
Information – Compared to the general public, minority groups – especially Hispanics – are more likely to have inaccurate information regarding their ability to buy a home, which might discourage them from even trying.
Affordability – Fannie Mae says the affordability gap tends to separate out renters, lower-income Americans and “seekers.” Some 35 percent of this subset attempt to buy homes but fail, compared with only 10 percent of the general public. Usually, it's because home-buying is more expensive than they expected or they didn't have adequate savings.
Credit – Nearly 40 percent of respondents say credit issues prevent them from buying a home. This is an even bigger concern to minorities, who rate it as an even greater barrier than affordability.
Confidence – While Americans as a whole are fairly confident they can navigate the home-buying process, minorities are less so. They fear discrimination, language barriers or the inability to find a trustworthy agent to help them.
Breaking the barriers
So, how do we break these barriers? First, we must provide better education about the home-buying process, the steps to repair credit and what home ownership entails. A close second is simply reaching out. Affordable lending offers opportunities to serve a wider field of members, yet still make grade-A loans.
A bonus is the high demand for these loan portfolios in the secondary market. This is especially attractive because as rates rise, credit unions might want to sell off their mortgage loans, keeping their pipelines open to make more loans.
Charlie Mac has complemented its JumboExpress prime product with a JumboExpress ALT-A affordable lending program, which allows for some variances to the underwriting process. Charlie Mac is a CUSO and secondary-market investor that purchases jumbo mortgage and auto loans from credit unions, helping them maintain member relationships. Contact your corporate investment representative for more information.